Trump vs. Europe: Energy Markets Hang in the Balance

2025 will not be your average year, especially not in terms of politics. We don’t know yet if changes will take the shape of the cold Siberian wind or further isolationist actions proposed by the US. We do know one thing: the energy landscape will shift, and we’ll need to adapt if we want to stay on top of the situation. Everything will be affected, from the energy markets to trade deals, investments and industrial policy. Leading voices in the energy sector call it a balancing act between costs for the energy transition and economic realities. Let’s see what we’re up against.

 

What’s happening on the Energy Markets?

The good news? Europe’s not sitting idly on its hands and waiting for blowback. These are the most important energy-related developments in the region:

• A new energy center in the East of the Mediterranean Sea. Thomas Achimastos, Vice President of The Copelouzos Group, spoke at EGYPES 2025 about the GREGY Interconnection, a joint project between Egypt and Greece. By transferring green electricity from Egypt to Europe, this project benefits sustainable development, a diversification of energy sources and a boost in European competitiveness on the energy market.
• Europe’s Industrial Green Deal has been leaked. As of right now, industry leaders in Europe are already analyzing Bruxelles’ decisions. According to several sources, the data does not support the decisions taken by the Commission, and it substantiates nothing more than wishful thinking for the next five years.
• Permanent EU representatives have approved the 16^th sanctions package of Russian activities and trade deals. We’re talking about a serious number of Russian companies and individuals that are supposedly involved in military actions in Ukraine. Among sanctions on Russian banks and their supposedly ghost fleet, we’re also discovering embargos on European companies that serve their oil refineries and gas processing plants. Of course, imports of rare metals or LNG from Russia are also prohibited, among other choice items like video game consoles. It remains to be seen if this agreement gets to be signed.
• Japan is increasing their LNG stocks. According to preliminary data, the major sources of import are the US and Russia. However, Japan has lowered imports of LNG and coal from Russia as opposed to previous years.
• The EU is still trying to kick-start LNG investments abroad, in a bid to lower energy prices. We’re already dealing with tariffs imposed by the US, so looking at the Japanese model might be a start. At the same time, France, and therefore Germany, have significantly increased LNG imports from Russia.

So, it’s highly unlikely that LNG from Russia will stop being a major factor in Europe’s energy independence race.

 

USA walks out on Paris Agreement

In a move that surprised absolutely no one, President Donald Trump backed out of the Paris Agreement for a second time now. The US joins countries like Libya, Yemen and Iran, as the lone entities standing outside this pact.

Citing a national energy emergency, the president decided to continue the drilling efforts in a bid to bring oil prices down, fill the strategic reserves and export energy across the globe.

And it looks like potential buyers are already lining up. However, this reversal on climate policies might have negative effects on US manufacturing, as well as claim jobs.

The New Green Deal is also in danger, as are electric vehicles and wind farms under the new executive.

But there’s more at stake: Argentina and Indonesia seem dangerously close to following the same route. The reasoning is simple: if leaders like the US are ramping up fossil fuel exploitation and not complying with the international agreement, why should everyone else, especially nations with a lower carbon footprint, not follow suit?

 

3 most likely scenarios

Very well, so where are we going from here? We’re looking at three most likely scenarios.

1. Most countries will put their money on isolationist policies and forget unity. The focus will be on putting economy and commercial barriers at the forefront, while investments in green energy slow down. The energy transition will no longer be a priority.
2. We keep an attitude of constructive optimism, meaning that competition and international cooperation keep us on track and the green transition alive and kicking. Progress will be staggered, but we’ll have the same destination, just different arrival times.
3. Adversity builds character and the global energy transition becomes a unifying proposition. This scenario is least likely, as sustainability should become a major economic driver and green energy investments reach an all-time high. It’s unlikely that the transition becomes inevitable, and countries start supporting each other in attaining the same goal, but it is possible.

 

Are we looking at a USA/Russia partnership?

We recently saw one of the most high-profile meetings in recent history between the US and Russia in Riyadh. High officials from both sides met and discussed the future of Ukraine for four hours. The only absent party? Ukraine…

The ending of the war notwithstanding, this marks a new chapter for bilateral relations of the two nations, which is a clear shift away from Biden’s approach of collaborating with Europe in order to isolate Russia.

This aims at a serious possibility for lifting of sanctions imposed by the Biden administration. According to Politico, Russia and the US are currently exploring cooperation options on a joint energy project in the Arctic. Trump has already considered buying Greenland from Denmark in an effort to gain a strategic position and exploit the minerals on said island.

Collaboration was never off the table: we’re thinking about the ExxonMobil and Rosneft joint venture in the Arctic Sea, drilling for hydrocarbons. Of course, Exxon backed down in 2014, after the start of the Crimea debacle, but we do have a precedent.

Trump’s play seems to be obvious. His new approach is not only about Russia, as he’s set his sights on Saudi Arabian investments and the GCC.

The Saudis are interested in stronger connections with the Americans, especially if we mention topics like security and economic cooperation. However, as part of the OPEC, Riyadh can’t bypass Washington’s demand on oil export and production.

Still, there’s another point we need to touch upon, namely rare minerals and metals. President Trump has already shown his cards, that is his interest in the above-mentioned resources, by asking Ukraine to hand over 50% of their reserves for continued military support.

As Saudi Arabia pursues aggressively developing the mining sector and welcomes foreign investments, their negotiation power seems to be on the rise.

 

US tariffs applying pressure

Reciprocal tariffs are back on the menu, and they will undoubtedly impact global trade.

The “eye for an eye policy”, as some analysts have dubbed it, is set to go in full effect come April.

Trump’s top analysts are on it, and the goal is matching all the tariffs imposed by other countries on US goods. This change in policy would also include taxes (value-added) and nontariff barriers. The justification is simple: the US economy needs it.

It’s likely that most countries will find a way to either delay, exempt or even negotiate said tariffs, but not everyone will be fortunate enough. And, again, to no one’s surprise, it seems that this measure will impact Europe the most.

It looks like both NATO involvement and trade agreements are now open topics for discussion. The key points here are a lack of growth in Europe, increasing energy transitions costs and real economic difficulties as a result of the war still raging on in Ukraine.

At the center of all these changes is Germany, which stands to lose the most, even if the EU avoids tariffs.

According to economists from the IW Köln institute, Germany’s price-adjusted GDP is liable to shrink by 0.1% this year, and further to 0.4% come 2026. However, we’re talking about measures that have been announced and then swiftly suspended. Still, Germany is also affected by the tariffs imposed on Mexico, China and Canada, since it depends on imports for intermediate goods processed in said regions and sold on the US market.

Not to mention the German companies with local branches in Mexico. We could be talking about costs that amount to approximately EUR 25 billion by the end of 2026, which paints a pretty grim picture.

But wait, there’s more: the impact on inflation is likely to remain limited, but the problem lies with energy prices becoming even more volatile.

Seeing that China has already established retaliatory tariffs on coal and LNG, Europe is still the most attractive market for US exporters, according to some analysts. It remains to be seen how Trump will tolerate this situation.

 

How should Europe be expected to respond?

Trump’s decision has led to some voices asking for the dissolution of the World Trade Organization in a bid to break free from the Chinese economy.

However, if the EU and other big trading partners do decide on disregarding the WTO principles, this could spell disaster for international trades and investments.

Not to mention tensions that could easily erupt in all-out war. As such, the European Commission will have to tread lightly in the following discussions in order to avoid undermining international law by entering into any commitments with the US.

Do the opposite, and the EU will not only fail to uphold its traditional values, but also prompt others to seek the same route the US has.

Bringing together as many impacted economies as possible and preparing a retaliation plan seems to be the best bet for preserving the WTO. Maybe the WTO itself and subsequent rules should be subject to change in order to face the rising challenges?

At the forefront of the battle against the tariffs on steel and aluminum, we find France, threatening to escalate trade tensions, pointing to the European Commission in order to determine which US sectors should be targeted as a response.

 

What about Romania?

As part of the EU, we expect to take the brunt of these changes, but are there any upsides?

It appears so, since Romania is among the countries with the smallest dependencies on energy imports in the EU.

For example, as recently as last year, our country’s demand was almost met by internal gas production and existing deposits.

One thing is for certain: we need to keep focusing on increasing energy and gas production. Only Estonia and Sweden are less dependent on imports than we are.

On the other hand, Sebastian Burduja, Romania’s Energy Minister, has a different take on the matter. According to him, Romania must drop the Green Deal policies and follow Trump in what he dubs “energy patriotism”. He goes on to advocate for companies to protect Romanian interests, akin to the recipe popularized by the current US administration. Among his requests, he asks for proposals that would suspend the Green Deal policies and several normative acts regarding the environment.

Be that as it may, the document fails to mention the outcome of such actions. Are we still getting the billion-dollar funds required for developing the renewable energy sector? This point is still up for debate.

Meanwhile, Europe is taking steps in mitigating the risks associated with a break from the US economy.

The tariffs will most likely be combated via a cooperation package that includes buying more LNG from the US, making American cars cheaper, teaming up against China and buying more American weapons.

However, the EU won’t budge on regulating major tech companies, and most of them are positioned across the Atlantic. The Digital Services Act, the Digital Markets Act, and the AI Act still address major policy changes required from US policymakers.

At the same time, Ukraine has agreed to accepting Washington’s proposal regarding the joint exploitation of minerals, gas and oil. Officials from Kyiv undoubtedly hope this means a long-term deal regarding security in the region, but this point has yet to be settled.

It looks like we’re watching a slow dance, where each participant is trying to lead the way and step on the other dancer’s toes. It will take some time before everyone dances to the same tune. But it’s not impossible.