US-EU Tariff Agreement Prioritizes Economic Security, Presents Pathway for Combating China

The art of the EU tariff deal has been revealed at last. The United States and the European Union released a written tariff agreement on August 21, following the handshake deal announced in late July. This agreement — which creates a friendlier business environment for U.S. companies operating in Europe and clarifies tariff rates for EU manufacturers exporting to the United States — achieves important progress for further U.S.-EU alignment.

Perhaps even more consequential is the agreement’s emphasis on joint economic security. The United States and the European Union have agreed to work together on a variety of issues to combat adversarial regimes’ undue influence on both economies. This is a step in the right direction to protect joint national security interests, but it must be done right to ensure success.

Economic Security Achieves New Prominence

The U.S.-EU agreement covers a variety of economic security issues, including tariff evasion, foreign investment review, forced labor, supply chain security, intellectual property protection, and critical minerals export controls. At a moment when China is trying to hoard U.S. semiconductors to boost its military’s AI capabilities and Russia is actively trying to circumvent U.S. sanctions to acquire goods that support its invasion of Ukraine, plugging the leaks in the U.S. and the EU economies is vital.

By including these critical issues in the trade deal, the United States and the European Union are acknowledging the importance of economic security and, particularly, economic security cooperation for effectively combating adversarial encroachment on the American and European markets. Cooperation is critical for closing the loopholes and backdoors that undermine economic statecraft — such as export controls and sanctions — while amplifying our combined ability to constrain adversarial regimes and stop hostile militaries without raising a gun.

A United Front

The United States and the European Union face shared threats from common adversaries. China’s blunt-force economic tools have harmed American and European domestic manufacturers. This includes the current rare earth export controls that have forced auto manufacturing shutdowns on both sides of the Atlantic and persistent Chinese dumping of lithium batteries, electronics, and textiles into both the U.S. and the EU markets to sabotage domestic manufacturing. China is not the only harmful common adversary; Russian hackers have targeted both the EU and the U.S. defense sectors, democratic institutions, and critical infrastructure.

Both economic blocs have independently pushed back against highly subsidized Chinese EVs entering their respective markets to protect domestic manufacturers. However, it is clear from the economic security focus of the framework agreement that both parties know that a united front is more effective than a divided one.

In 2024, the United States imported more than $438 billion in goods from China, while the European Union imported just over $600 billion, cumulatively representing about one-third of all Chinese exports. Their combined economic power represents tremendous leverage over China’s export-driven economy.

Further Cooperation

The U.S.-EU framework commits to cooperation on key economic security issues, but getting the details right is critical.

To build a true transatlantic economic security partnership, the United States and the European Union must align export control lists and commit to forceful enforcement mechanisms for both individuals who violate the controls and for third-party countries that provide transshipment backdoors to export control violators. Western adversaries must not benefit from access to Western goods. Developing coordinated tariff rates against China will also be critical to maximize the leverage to push back against China’s unfair market manipulations, including oversupply, dumping, and IP violations.

Finally, the United States and the European Union should develop unified forced labor regulations. Both jurisdictions have passed laws in recent years to crack down on forced labor in global supply chains. This is an opportunity to bolster those efforts with a transatlantic requirement that multinationals comprehensively map their supply chains to uncover hidden reliance on forced labor practices.

Susan Soh is a research associate for the Center on Economic and Financial Power at the Foundation for Defense of Democracies (FDD). For more analysis from the author and FDD, please subscribe HERE. Follow Susan on X @SusanSoh827. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.