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US-EU Framework Agreement: Implications for China and International Businesses
October 2025
By Janz Chiang. Working at Sandpiper China and based in Beijing, Janz has extensive experience in advising clients on policy, public affairs and trade related issues.
On 21 August, the United States and the European Union released a joint statement outlining a new framework for “reciprocal, fair and balanced trade”, following months of escalating tensions, primarily driven by the Trump administration’s aggressive tariff policies – even toward longstanding allies.
What potential impact does the framework have on multinational enterprises, and what should business leaders and communicators consider, as geopolitics is increasingly becoming an important factor in international business strategy.
Back in April, President Trump introduced a 10% baseline tariff rate to all trade partners and a 20% rate targeting the EU. Although implementation was suspended due to market instability, the threat of further escalation remained. 17 July, Trump warned of a 30% tariff on EU imports, set to begin 1 August, after negotiations stalled. A breakthrough came on July 27, when both sides announced a deal capping tariffs at 15% for most EU exports.
The August framework clarifies and consolidates the July agreement, particularly where earlier announcements diverged, such as in investment and pharmaceutical trade. More importantly, it lays out moves toward broader strategic alignment.
Key Provisions on Strategic Alignment
The framework goes beyond tariff ceilings and purchase commitments, outlining cooperation on economic security, technology governance, and supply chain resilience.
The EU has committed to aligning its technology security standards with those of the US to prevent leakage to destinations of concern. Both sides also pledged to cooperate on a range of issues, including responding to third-country export restrictions on critical minerals, addressing non-market policies, coordinating investment reviews and export controls, preventing duty evasion, and tackling unfair competition and lack of reciprocity in public procurement. Furthermore, both sides will negotiate rules of origin.
While China is not explicitly named, the provisions clearly address concerns related to Chinese trade and domestic market practices, including export controls, critical mineral supply chain vulnerabilities, strategic investments, market access barriers, and transshipment.
China’s Concerns and Potential Countermeasures
Although Beijing has not officially responded to the August agreement, previous statements suggest unease over the US employing tariff threats to pressure trade partners into adopting provisions that could harm Chinese interests. In July, China’s Ministry of Foreign Affairs warned against deals made at the expense of Chinese interests. Similarly, in April, the Ministry of Commerce vowed to take “firm and reciprocal countermeasures” if such agreements materialize.
There are reason for China’s concerns as Scott Bessent, Treasury Secretary in the Trump administration’s in April outlined plans to use tariff negotiations to pressure trading partners to limit their dealings with China in exchange for concessions.
Similarly, these are not idle threats from the Chinese side, as the country has previously retaliated against countries aligning with US trade policy, such as by imposing tariffs on Canadian agricultural exports after Canada levied duties on Chinese electric vehicles and steel. China possesses a broad toolkit for retaliation, including import bans, tariffs, and export restrictions on critical goods like rare earths. However, immediate retaliation is unlikely for a few different reasons.
First, China has been working to improve trade relations with major markets, including the EU, capitalising on the rift between Washington and its allies. A premature, aggressive response could backfire and push the US and EU closer together. Second, the framework remains largely aspirational. Without concrete implementation, China is expected to maintain its wait-and-see approach, responding only when it perceives tangible harm, such as new tariffs or restrictions. Beijing will likely closely monitor the implementation while using diplomatic and economic tools to influence outcomes behind the scenes.
Enterprises Navigating a Reputational Minefield
For multinational organisations, the agreement introduces business and reputational risks. While having limited influence over trade policy, companies are often at risk of being caught in the crossfire of geopolitics. In this environment, awareness and neutrality is key. Public positions on sensitive trade issues can backfire, and inconsistent messaging across markets undermines credibility.
Some companies may feel pressured to issue appeasement statements when targeted by retaliatory measures from one side. However, this can quickly escalate tensions and strain relations with stakeholders from the other side. For this reason, it is essential that organisations engage strategic communications experts. These professionals can advise on when and how to communicate to minimise blowback and guide companies through this reputational minefield. External communications should be tightly managed, with only designated spokespeople authorised to speak publicly.
While the US-EU framework agreement may not lead to immediate disruptions, it signals a broader shift in global trade dynamics. Businesses need to closely monitor geopolitical change, policy, and trade agreements, particularly in areas such as tech exports, supply chains, and international investments. Proactive risk assessments and scenario planning are essential to navigating this evolving landscape.
Adopting a multi-market perspective is increasingly critical, as aligning with policies in one region can trigger backlash in others – as evidenced by the experiences of Nike and Burberry in China. As trade becomes increasingly fragmented and politicised, companies must be prepared for geopolitics to play a growing role in shaping their business strategies.
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