The “Liberation Day” tariffs that US President Donald Trump announced on April 2 did not resurrect economic statecraft. It never went away. The new US approach, however, signaled a decisive shift. Until then, the European Union had preferred to convince itself that each episode of economic statecraft could be managed without asking hard questions regarding the existing multilateral system of rules and institutions.
That illusion is a luxury the EU can no longer afford to harbor. America’s tariffs and China’s relentless use of economic levers have forced Europeans to ask whether their existing approach is suited to the realities of power politics.
Economic statecraft, the use of economic levers to achieve (foreign) policy goals, is hardly novel. For most of the 2010s, China’s use of market access, investment, and trade restrictions to pursue political goals was often described as economic statecraft. Yet in Europe, the debate took a different turn. Instead of confronting such statecraft head-on, Europeans preferred to speak only of economic security, and acted within that framework. When China acquired strategic assets, Europe created an investment-screening regime. When Beijing or Washington used coercive trade measures, Brussels devised the Anti-Coercion Instrument (ACI).
The choice of speaking and thinking in terms of economic security rather than economic statecraft was not accidental. For Europeans, three shocks defined the economic security debate: the COVID-19 pandemic, Russia’s full-scale invasion of Ukraine, and China’s key role in global supply chains. Each exposed vulnerabilities in vital supplies. That made economic security the natural organizing principle for the issues the EU was facing.
Legal Guardrails
Adjusting conceptually to linking economics and national security proved easier for Brussels than expected. Economic security came with legal guardrails. National security exceptions justified measures like investment screening and export controls. The exceptions could be stretched but still remained tied to World Trade Organization (WTO) rules.
Economic security also lent itself to a multilateral framework. The G7’s 2023 Leaders’ Statement on Economic Resilience and Economic Security sketched out a collective approach. Brussels built its strategy around three pillars: “protect,” “promote,” “partner,” the last of which enshrined cooperation as a principle. China, too, pursued economic security by working with others. The difference was in structure: The EU imagined a network of equals, while China preferred a hub-and-spoke with Beijing at its center.
That does not mean economic security has been painless for the EU. It exposed tensions between Brussels and member states, since trade and investment policies are EU competences while national security remains national. It also triggered competence wars within capitals, between economy and defense ministries. Even so, the fundamental rules-based framework endured. Economic security was folded into familiar legal and institutional habits.
(Re)enter Economic Statecraft
China’s use of economic leverage continued unabated, even if analysts stopped calling it by that name. Economic statecraft never left, and the US revived it. The second Trump administration unilaterally imposed tariffs and reshaped the nature of export controls, treating them less as national security tools than as bargaining chips.
This is the crux: Unlike economic security, statecraft is not about rules. It is about power. Legal justifications bend to political ones. China’s ever-expanding “red lines” and the retaliatory measures they justify illustrate how politics dictates law. Statecraft is unilateral, dismissive of WTO obligations, and ruthless in its asymmetry: The strong wield it and the weak endure it. Most countries had little choice but to accept the US’ “reciprocal tariffs” in April 2025 and afterwards.
For the EU, this presents three challenges. First, it has grown adept at spotting vulnerabilities but less adept at fixing them. As Mario Draghi highlighted on the anniversary of his Competitiveness Report, in September 2025, Europe remains slow and fragmented. Second, Brussels knows its economic levers but rarely pulls them. The ACI has yet to be used, three years after adoption, despite several opportunities. Third, the EU lacks a coherent statecraft strategy.
From Security to Statecraft
Brussels has proved it can design strategies: The 2023 economic security framework is evidence of that. What it has not done yet is normalize economic statecraft. That requires at least three steps.
The first is to start talking about economic statecraft, not just economic security. If a legal framework is what the EU needs, then the time has come to shape its policies to enact economic statecraft.
The second is competence. Single member states cannot hope to compete with China or the US. Only the EU as a bloc has the necessary weight. Yet member states remain reluctant to surrender control, even as bilateral deals between Washington and Beijing sideline European interests. Unless the Europeans resolve the challenge posed by competence, it will increasingly watch others set the rules.
The third is confidence. The EU clings to its role as defender of the rules-based order, but economic statecraft is the new normal. On paper, Europeans know this. In practice, Brussels and EU member states still behave as if the old order can be preserved through incremental adjustments.
The Road Ahead
Economic statecraft, unlike economic security, is not only about national security, resilience, or supply chains. It is about wielding economic power to shape outcomes. That does not mean the EU must mimic China or the US step by step or that it should abandon the importance of rules. But it must accept that statecraft is now (part of) the game.
That implies using tools more proactively. Economic measures should not be a last resort. If another country deploys economic leverage to sway policy—or simply adopts measures that harm European interests—the EU should be able to respond in kind. More than that, such measures should advance a proactive agenda to realize EU’s interests, such as turning Europe’s defensive reflexes into a strategic asset.
The EU’s experience with economic security shows it can adjust when pushed. Investment screening and export controls have become standard policy tools. The challenge now is to apply the same logic to statecraft and the tools that will empower it. That will require faster decision-making, greater willingness to act unilaterally when necessary, more initiative to act collectively with other willing actors, and most crucially greater competence for Brussels.
The year 2025 marks the consolidation of a world in which power, not rules, increasingly defines outcomes. Economic statecraft is no longer an exception; it is the norm. If the EU wants to shape events rather than be shaped by them, it must accept that reality. Unprecedented times call for unprecedented actions, including the transfer of new competences to Brussels.
Francesca Ghiretti is director of the RAND Europe China Initiative and a research leader at RAND Europe.
