Vulcan View: The latest EU developments 21 July – 25 July

EU reassesses trade strategy following US-Japan agreement

On Tuesday, 22 July, US President Donald Trump announced the conclusion of a new bilateral trade agreement with Japan. The deal, which Trump has described as “the biggest deal ever made,” introduces a 15% tariff on Japanese exports – significantly lower than the previous 25% tariffs that were due to come into effect on 1 August. In return, Japan has agreed to a $550 billion investment in the US. On the EU side, negotiators believe that a final EU-US deal could mirror the US-Japan trade agreement.

President Trump shared the announcement on his Truth Social account, highlighting that Japan will open its market to US made “Cars and Trucks, Rice and certain other Agricultural products, and other things.” Trump has marked the agreement as a landmark achievement, stating: “We’re doing things that have never been done in this country before, and our country is becoming very rich again, and that’s the way it should be.”

While exact timelines and information on implementation have not been announced, officials on both sides have described the agreement as a critical step towards a more balanced and mutually beneficial partnership, with Japanese Trade Minister Ryosei Akazawa, sharing “mission accomplished.”

The EU’s reaction 

For the EU, this US-Japan Trade Agreement may shape negotiations for a potential EU-US Trade Agreement. It can be anticipated that the EU will face similar pressure to invest more in the US in return for lower tariffs.

Moreover, the EU has revised its second list of proposed tariffs on US goods. The revised second list is now expected to be combined with the first list to create a €93 billion US trade retaliation package.  

Notably, items expected to be removed from the list are laboratory reagents, semiconductor parts, and X-ray apparatus. In addition, following stakeholder consultations, several goods related to health care are expected to be removed, such as surgical materials, wheelchairs, and other medical devices.

In addition, EU Member States approved the enlarged package of countermeasures on Thursday, 24 July, with the retaliation package expected to enter into force on 7 August – this date is tentative and depends on what Trump announces on 1 August. The European Commission is expected to publish the list on Friday, 25 July, with some items on the list facing a tariff of up to 30%.

By dropping items from the list of retaliatory tariffs, it appears the Commission is responding to feedback from European industries and Member States concerned about potential supply chain disruptions. Irish officials have noted that nearly €1 billion of products that have been removed from the retaliatory list are products on which Ireland has a high trade dependency on the US, namely pharmaceutical and agricultural products.

EU seeks to rebalance ties with China in high-stakes summit

On Thursday, 25 July, European Commission President Ursula von der Leyen and European Council President Antonio Costa met in Beijing with Chinese President Xi Jinping and Chinese Premier Li Qiang in a one-day summit. EU leaders delivered a stark message: the economic relationship between the two global powers has reached a critical “inflection point” and must be rebalanced.

Both EU leaders travelled to China to address a soaring trade deficit and what the EU sees as unfair competition. The summit concluded with only a joint formal statement on climate cooperation, underscoring the deep-seated challenges that remain.

An uneven playing field

At the heart of the EU’s grievances is a trade relationship it argues is increasingly skewed in China’s favour. President von der Leyen highlighted that the EU’s trade deficit has doubled over the last decade to more than €300 billion:  “Unlike other markets, Europe keeps its markets open to Chinese goods, […] however, this openness is not matched by China.”

A key concern raised by the European delegation was the issue of subsidies and overcapacity. The EU contends that the Chinese state provides significant financial support to its domestic industries, particularly in green technology sectors like electric vehicles (EVs), solar panels, and batteries. This practice, the EU argues, puts European industrial competitiveness at risk. The ongoing dispute over the EU’s anti-subsidy investigation into Chinese EVs is a clear example of this friction, an issue that remained unresolved at the summit.

Market access and raw materials

Beyond subsidies, the EU leaders pressed China on two other priority areas: market access and export controls. On market access, the principle of reciprocity was stressed, with the EU pushing for European companies to have the same opportunities to bid for public contracts in China as Chinese companies have in Europe. While no firm commitments were made, the two sides agreed to work on finding concrete solutions.

Another critical topic was China’s control over the export of critical raw materials. Recent Chinese export controls have put a significant strain on some European companies that rely on these materials, such as the European automotive industry. While a full reversal of these controls was not achieved, the summit did yield one small breakthrough: an “upgraded supply chain mechanism.” This mechanism is designed to allow for the immediate review and resolution of supply bottlenecks, providing a faster way for businesses to address licensing issues.

Conclusions

Finally, the summit may be remembered more for what was said than for what was agreed upon. Expectations were low, and the fact that the 27 EU member states presented a united front, rather than seeking individual deals, was seen by some analysts as a victory in itself. The only formal deliverable was the joint statement on climate change. This was a welcome development, as there had been doubts that it would be agreed upon at all. The statement recommits both sides to the Paris Agreement, pledging to accelerate the deployment of renewable energy and to work together towards ambitious outcomes at the next COP30.

In conclusion, the Beijing summit served as a platform for the EU to articulate its economic concerns with unprecedented clarity. The EU has made it clear that for trade to remain mutually beneficial, it must become more balanced and fair. The ball is now in Beijing’s court to address these issues. As President von der Leyen warned, how China responds (not only on trade but also on its position regarding Russia’s war in Ukraine) will be a “determining factor” for the future of the EU-China relationship.

Big numbers, bigger challenges: insights from the Summer Economic Statement and revised NDP

Ireland is entering an era of extraordinary public spending. In a single day, two major economic documents were published: the Summer Economic Statement (SES), which outlines short-term budgetary plans for 2026, and the revised National Development Plan (NDP), focused on long-term infrastructure investment. While the numbers are certainly ambitious, they also raise difficult questions around delivery, oversight, and fiscal sustainability.

The revised NDP

Minister Jack Chambers announced an updated NDP with a total projected investment of €275.4 billion over the period 2026 to 2035, including €102.4 billion in capital spending allocated between 2026 and 2030. The review adds €34 billion compared to the previous 2021-2030 plan.

The largest allocations include:

• €36 billion for housing, split into:
>• €28.3 billion for housing delivery
>• €7.7 billion for water infrastructure
• €22.3 billion for transport
• €9.3 billion for health
• €7.6 billion for education
• €5.6 billion for climate, environment, and energy

The government has described the revised NDP as a “landmark moment” and the largest capital investment in the State’s history. It is intended to address persistent gaps in infrastructure and public services that have struggled to keep pace with Ireland’s rapid economic and demographic growth.

However, specific project priorities have yet to be announced by individual ministers and departments, and timelines for delivery remain unclear. How the government intends to accelerate delivery in sectors already facing capacity constraints is a key outstanding question.

Summer Economic Statement 

The Summer Economic Statement outlines a €9.4 billion budgetary package for 2026, to be formally announced on 7 October. It includes:

• €7.9 billion in additional spending
>• €5.9 billion for current expenditure
>• €2 billion in capital expenditure
• €1.5 billion in tax cuts

However, the SES is based on a set of optimistic assumptions, most notably that no new international tariffs will be introduced, despite growing expectations that a 10% blanket tariff may become the new baseline. The SES also cautions that Ireland’s headline public finance figures may be misleading. Excluding volatile windfall corporation tax receipts, the country would be running a budget deficit of nearly €11 billion. This casts serious doubt on the sustainability of continued fiscal expansion.

Conclusion

If implemented effectively, sustained public investment offers a real opportunity to address Ireland’s longstanding infrastructure deficits. What happens next remains to be seen. With the Dáil now in summer recess until 17 September, when it returns, attention will turn to Budget 2026. The real test will be whether these ambitious commitments can be translated into credible, deliverable outcomes.

Compliments of Vulcan Consulting – a member of the EACCNY