US President Donald Trump and his Chinese counterpart, Xi Jinping, agreed to a significant de-escalation of their trade dispute during their meeting yesterday (Thursday) in South Korea, suspending for 12 months controls on exports of rare earth magnets and other critical raw materials.

This emerging de-escalation of tensions between the US and China gives European leaders some breathing room to formulate strategies on trade, raw materials, and the war in Ukraine. However, according to Politico, it also risks sidelining European interests.

While the rapprochement between the two powers is good news for European companies caught in the middle of the dispute, other points of friction between Europe and China remain difficult to resolve, even with the gift of extra time.

Brussels, under pressure from Washington and pursuing its own strategic interests, has struggled to persuade Beijing not to support Russia in its war with Ukraine. At the same time, the EU is trying to calm tensions in its long-running trade dispute with China, which has intensified with recent restrictions on exports of critical raw materials and microchips. These measures have directly impacted European industry, particularly car manufacturers, who were already under strain before the restrictions.

Fear of permanent, irreversible damage to European industries has led the EU to adopt a more conciliatory stance in the trade confrontation, emphasizing cooperation and dialogue over punitive measures.

However, Chinese authorities have reacted negatively to the slow and uncoordinated pace of talks with the EU, prompting Beijing to downgrade Europe on its list of priorities, according to Jeremy Chan, senior analyst at Eurasia Group.

“The EU is, at best, secondary—perhaps even less, or not at all important—to Washington and Beijing in these negotiations,” Chan told Politico.