Written by: Valbona Zeneli
The highly anticipated meeting between US President Donald Trump and Chinese President Xi Jinping reflects a shared interest: stabilizing a relationship increasingly dominated by trade rivalry, technological competition and geopolitical tensions.
For the two largest global economies that together account for almost half of world output, a de-escalation has its own strategic logic, albeit for different motives on each side. All aim to buy time, reduce vulnerabilities and strengthen the resilience of their economies.
This attempted normalization will have significant consequences for the European Union, reshaping global trade flows and the balances of the international economic order.
But tensions remain high, and the sides are increasingly preoccupied with larger strategic challenges. The Iran crisis has added a new layer of complexity to an already fraught, yet deeply interdependent, relationship. China depends on Iran as an energy partner, and Washington recently sanctioned five Chinese refiners accused of importing Iranian oil, while Beijing has responded by invoking the Anti-Sanctions Act and warning Chinese companies not to comply with the US measures.
The hypothesis of a “Phase II” trade deal seems limited, given that the previous “Phase I” agreement of the first Trump term has remained largely unfulfilled. In the absence of concrete signals of sustained high-level dialogue between the two administrations in the months leading up to the meeting, a broad-based agreement seems unlikely.
For years, President Trump has sought to reduce the US trade deficit and correct structural imbalances in economic relations with China, accusing Beijing of unfair trade practices, considered among the main causes of the decline of the American manufacturing sector. However, despite tariffs, sanctions and repeated negotiations, there is no evidence of a structural change in the Chinese economic model. In 2025, China recorded a trade surplus of almost $ 1,2 trillion, about 20% of its Gross Domestic Product, supported by diversification into alternative markets to the US.
Achieving a “fair” deal in this context would be difficult. The most likely scenario is an extension of the fragile ceasefire reached in October 2025, a tactical agreement, limited but of strategic importance, intended to contain trade tensions and preserve channels of dialogue for future negotiations. The Trump-Xi summit could also end with targeted economic announcements such as Chinese purchases of American agricultural products or aircraft, promises of broader cooperation, and progress on the concept of a “Trade Board” for managing bilateral disputes. More complicated remains the issue of an “Investment Board,” hampered by deep mutual distrust.
On the strategic front, divergences remain deep, particularly over Iran. China’s dependence on Iranian oil remains a significant source of tension between the two countries, and President Trump will seek to persuade Xi to use Beijing’s influence over Tehran to favor nuclear negotiations and ensure the security of the Strait of Hormuz. But China has little incentive to pressure Iran in the way Washington desires, despite the economic costs of instability in the Middle East. It may even see strategic advantages in a prolonged American engagement in the Middle East, a front that draws attention away from competition in the Indo-Pacific.
What are the implications for Europe? Official Brussels and European capitals have a strong interest in stabilizing Sino-American relations, both for geopolitical reasons and for economic security. Instability in the Middle East fuels economic pressures on Europe through higher energy costs, disruptions to trade routes, inflation, and loss of industrial competitiveness.
On the trade front, the EU is already feeling the effects of the trade disconnect between the US and China. As US restrictions on Chinese imports have tightened, an increasing share of Beijing’s exports has been redirected to the European market, deepening trade imbalances and increasing competitive pressure on European industries. By 2025, the European trade deficit with China had reached almost €360 billion, with Chinese exports to the EU almost double European exports to China. Further tightening of US measures on Chinese imports risks amplifying this imbalance, making Europe the main destination for Chinese overproduction. In parallel, potential “managed trade” agreements that redirect Chinese purchases towards US goods could directly harm European exporters. However, a possible trade agreement between the US and China could create the conditions and impetus for the resumption of negotiations between the EU and China, following the freezing of the CAI in 2021.
On the critical raw materials front, European dependence on China for rare earths, permanent magnets and strategic minerals, essential for green, digital and defence industries, remains a strategic vulnerability. Possible Sino-US agreements in this sector could provide temporary relief, including an extension to October 2025, but are no substitute for a long-term strategy. The Critical Raw Materials Act and transatlantic coordination go in the right direction, but reducing dependence on Beijing will require years of investment and targeted industrial development.
The concrete results of the Trump-Xi summit will likely remain limited, and no trade deal will fundamentally change the structural dynamics of the Chinese economic model. However, the US and the EU share an interest in managing strategic competition with China through a form of pragmatic coexistence, keeping channels of communication open to avoid unwanted escalations.
The main challenge for the EU is to become an active player in geopolitical competition, to equip itself with a clear strategy towards China and to invest in its own industrial and technological competitiveness, and not simply adapt to the rules of the game written by others. / The article was published as an editorial in Il Messaggero
*Dr. Valbona Zeneli is a senior expert at the Atlantic Council and a member of the advisory board of Decode39
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