On July 27 local time, the United States and the European Union, the two largest economies in the world, reached a preliminary trade agreement. The next day, the euro suffered its largest single-day drop in nearly two months, and several EU member state leaders expressed concerns and dissatisfaction with the agreement.

How does Europe, especially Germany, view the potential impact of this agreement on the European economy? Why does Europe emphasize strategic autonomy while simultaneously strengthening its dependence on the United States in areas such as security and energy? How can Europe balance its closer relationship with China in the face of increasing pressure from the United States?

Regarding these topics, Observer.com spoke with Professor Zheng Chunrong, Director of the German Research Center at Tongji University.

[Compiled by Observer.com, Guo Han]

Observer.com: The agreement between EU leaders and Trump has sparked a lot of discussion, especially with countries like France taking an aggressive stance. In contrast, Germany seems to have not made overly strong reactions. Do you think this agreement between the US and the EU meets the expectations of the German political and business circles?

Zheng Chunrong: It depends on how we define "expectations." From a certain perspective, there are indeed different levels of expectations within Germany — some are high expectations, while others are "tolerating and accepting" bottom-line expectations. From the perspective of the German business community, there are certainly voices of dissatisfaction. They worry that the currently announced 15% tariff and additional conditions could place greater pressure on the already weak German and European economy. Moreover, the international competitiveness of German companies is already being undermined, and changes in tariff policies will inevitably affect Germany's GDP growth rate and export performance.

Overall, the reaction of the German business community is relatively disappointing, and they believe that the pressure will further intensify in the future. In the political sphere of Germany, there may have been initially higher expectations, but in the end, they could only accept the outcome. In a way, this is a "reluctant pragmatic choice" — after all, Europe avoided a 30% punitive tariff and the outbreak of a full-scale trade war with the United States. A trade war would undoubtedly be a worse scenario for the German economy.

But from another angle, German Chancellor Merkel once proposed an ideal goal of striving for complete zero tariffs and restarting negotiations on the EU-US trade agreement, which obviously lacks practicality. Trump first exerted pressure, threatening a 30% tariff, then gave part of a "concession," which psychologically might make Europeans more willing to accept it.

On July 27, Trump met with von der Leyen in Scotland and announced the agreement between the US and the EU. Visual China

Observer.com: According to the current content of the agreement, the 15% unified tariff may bring what impacts to industries such as German automobiles, pharmaceuticals, and machinery manufacturing, including the impact on their long-term competitiveness? Could it accelerate the restructuring of Germany's manufacturing supply chain and market adjustments?

Zheng Chunrong: This will indeed have a substantive impact on the German economy, especially on the manufacturing sector. First, we need to clarify that both sides are still in the stage of reaching a framework agreement, and many technical details have not yet been clarified. For example, how the 75 billion US dollars in purchases promised by Europe are calculated, whether all industries are subject to a 15% tariff, and whether there are additional terms, none of which have clear answers so far. In addition, the statements of Trump and von der Leyen also show a certain degree of inconsistency.

From the perspective of specific industry impacts, the German automotive and pharmaceutical industries are hit first. In fact, this kind of pressure mechanism has already become evident in recent years — some European manufacturing has begun to move to the United States. After all, one of Trump's tariff strategies is to attract foreign enterprises to produce locally in the United States rather than continue exporting.

Therefore, from the perspective of industrial chain restructuring and supply chain adjustment, German and European enterprises may gradually move overseas, especially to the United States, due to cost calculations and competitiveness considerations. However, this process will not happen immediately, as it requires time to observe the specific implementation of subsequent tariff policies and the uncertainty of whether Trump will change his mind.

European companies will also maintain a cautious attitude, because the uncertainty is still very high: even if the agreement is currently agreed upon, it remains unknown whether Trump will overturn the agreement in the future.

Observer.com: The attitude of the EU towards this agreement seems to be inconsistent. Countries such as France, Spain, and Ireland have shown strong reactions, while the German government seems to emphasize more the pragmatic position of "avoiding the worst outcome." Will this difference exacerbate the inconsistency within the EU on this issue?

Zheng Chunrong: First of all, it needs to be clarified that the EU's common trade policy authority is managed by the European Commission, not by individual member states. Member states can certainly raise opinions and try to influence von der Leyen's position — for example, Merkel believes that it is not acceptable to clash with the US, while Macron hopes that Europe's stance should be stronger. However, the final decision is made by the European Commission, which is a result of von der Leyen and others' considerations.

In addition, after this term of the European Parliament elections, the power concentration of the European Commission led by von der Leyen is quite high, which partly stems from the relative weakening of the political status of some major countries.

Certainly, the contradictions among EU member states regarding tariff negotiations are inevitable. In the process of implementing the details of the agreement in the future, France and Germany may still try to exert influence. Therefore, von der Leyen needs to achieve a certain balance and flexibility on the technical level.

Observer.com: The preliminary agreement between the US and the EU marks an important milestone in transatlantic relations during the Trump 2.0 era. This agreement includes the EU purchasing a large amount of American energy and military equipment. Does this deepen Europe's structural reliance on the US in energy and security fields? Has the discussion about so-called "strategic autonomy" been marginalized?

Zheng Chunrong: I do not think "strategic autonomy" has been completely abandoned. On the contrary, the arrival of Trump 2.0 has actually further enhanced the awareness of strategic autonomy within Europe. Especially French President Macron, who has always been an active advocate of European strategic autonomy.

However, the question of how to "implement" strategic autonomy is understood differently within the EU. For example, France advocates developing an independent European defense system and weapons systems, while Germany's view is more balanced, believing that strategic autonomy does not mean largely decoupling from the US, but rather maintaining dependence on the US while enhancing its own capacity for independent action. This "two-track" approach is more in line with Germany's realistic considerations.

Taking armaments as an example, Germany believes that completely independently developing weapons systems is costly and time-consuming, making it difficult to achieve short-term alternatives, so continuing to rely on the US is still a realistic choice. Including in nuclear security guarantees, relying solely on France (or even the UK) without the US is insufficient.

Moreover, recently, Europe has repeatedly emphasized strengthening coordination with the US within the NATO framework, including NATO Secretary-General Rasmussen saying some words to please Trump at a summit, which is an attempt to make certain concessions to "retain Trump," indicating that Europe's dependence on the US has not weakened, but has even strengthened in some aspects. After all, the tariff negotiation is not just an economic and trade negotiation, but also involves comprehensive considerations of US-EU security and defense cooperation. If Europe takes a firm stance and causes Trump to even walk away from the defense field, this is clearly not what Europe wants to see.

Therefore, there is a paradox here: on one hand, Europeans are enhancing their ability to improve strategic autonomy, including increasing defense spending and investing more in the development of their own weapons systems, which will definitely bring about an improvement in defense autonomy compared to the past; however, on the other hand, they have also deepened their dependence or binding on the US in areas such as energy, trade, and arms, so overall, the enhancement of Europe's strategic autonomy is still very limited.

German Chancellor Merkel had hoped for an exemption from US tariffs on German cars, but after the US-EU agreement was reached, she stated that this was "the best possible outcome under specific circumstances." Financial Times

Observer.com: With the increased uncertainty of US policies, the EU held high-level contacts with China last week, while also raising a tough stance on issues such as capacity, subsidies, and market access. Can this be considered a "negotiating while decoupling" phenomenon? In the current situation, will Europe consider a strategic approach toward China?

Zheng Chunrong: After Trump's second term, Europe indeed intends to reduce its dependence on the US and retain more room for maneuver. This definitely means trying to maintain constructive contact with China. This can be seen from冯德莱恩's visit to China, the arrangements for high-level meetings between Chinese and European leaders, and the signals she released at the Davos Forum previously, hoping to strengthen constructive communication and cooperate where necessary in areas such as economic and trade issues and global governance.

Under the pressure of the US, Europe obviously should consider deepening cooperation with China. However, the development of Sino-European relations has not fully met such expectations. Part of the reason is related to the psychological and strategic approaches of the EU side.

On one hand, they want to maintain cooperation with China to gain more diplomatic space; on the other hand, they have developed a "waiting for a better price" mentality against the background of Sino-US confrontation: since China wants to deepen cooperation, they take the opportunity to make some unreasonable demands or requests, even linking Sino-European relations to issues such as the Ukraine conflict and imposing various additional requirements.

At the same time, there are some forces in Europe that hope to play the "China card" in their relations with the US to gain a more favorable position. This strategy of "trying to please both sides" restricts the deepening of Sino-European relations to a certain extent.

Observer.com: So far, how do you evaluate the continuity and future direction of the Merz government's China policy compared to the previous German government? Is it expected that the German Chancellor's visit to China in the near future?

Zheng Chunrong: First of all, compared to the previous coalition government, the Merz government's policy toward China has a relatively strong continuity: on one hand, it continues to promote practical economic and trade cooperation between the two sides, and on the other hand, it follows a "risk reduction" strategy toward China in sensitive areas, thus continuing to implement a certain dual-track policy.

Secondly, it can be observed that since taking office, Merz has been relatively cautious in his official statements on China, and even rarely makes statements. My understanding is that this reflects his intention to maintain close coordination with the EU on China policy and to make systematic adjustments after observing the development of Sino-European relations as a whole.

Finally, compared to the previous three-party coalition government, the current German government has significantly improved internal coordination capabilities, and Merz has a more solid control over the ministries, including the foreign minister and economic minister, who are both from the CDU, and has hired a group of professionals as senior officials. Merz himself has a background in the business sector and has a deeper understanding of the importance of Sino-German economic and trade cooperation. Based on the current information, I believe that he has a high probability of visiting China in the second half of the year, and the strengthening of practical cooperation between China and Germany in the economic and trade field is still worth looking forward to.

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