Europe and China are enjoying a diplomatic spring following a long winter in the wake of China’s support for Russian President Vladimir Putin’s war against Ukraine. German Chancellor Olaf Scholz brought a large business delegation with him on his April trip to China, his second visit there since taking office, and Chinese President Xi Jinping traveled to Paris, Budapest, and Belgrade in early May.
But European leaders are still looking askance at Beijing for two major reasons. Xi’s dual-use goods support) for the Russian war against Ukraine makes China an indirect security challenge to Europe even if China is not directly involved in the war. In the run-up to this spring’s diplomatic engagements, U.S. Secretary of State Antony Blinken urged European allies to call out Chinese support for Russia’s war and hinted at further sanctions.
The other reason is economic: China’s industrial overcapacity—especially in electric vehicles (EVs)—and its cheap exports of manufactured clean energy products make China a real challenge to European economies and industries. Both U.S. Treasury Secretary Janet Yellen and Scholz urged Chinese policymakers to address its domestic overcapacity issue during recent trips to China. Yellen warned China against dumping cheap manufactured goods into U.S. markets. She also explicitly said that the Biden administration would not rule out additional measures to protect U.S. clean energy industries from China’s excess capacity.
Scholz, however, has been much more skeptical toward both the possibility of imposing tariffs on Chinese EVs and an ongoing European Commission investigation into Chinese subsidies out of fear that Beijing would retaliate against German carmakers in China that are producing cars in China for the European market as well as selling cars in China for the Chinese market.
But there is now a third factor shaping the relationship between Europe and China: The U.S. elections in November, and the stark choices that Europeans might be confronted with if former President Donald Trump returns to the White House.
During his first term, Trump showed little patience for European big business deals with China while those same countries relied on the U.S. security umbrella in Europe. The potential return of Trump risks more than a new trade war between the United States and Europe; it could also damage the alliance and scorch the first seeds of a coordinated trans-Atlantic China policy. In a worst-case scenario, Trump will use his leverage over Ukraine and the U.S. role in Europe’s security in order to force a more antagonistic China policy on Europe.
For some European leaders and constituencies, the prospect of Trump’s return seems to be enough of a reason to nudge closer to China despite making public pledges to “de-risk.” After all, why should Europe risk two of its most important economic relationships—those with the United States and China—at once? However, Europeans should not take the uncertainty of the upcoming U.S. elections as a pretext for wishfully thinking that they can maintain business as usual with China or compartmentalize their service to the Chinese market from elsewhere.
It is not U.S. policy toward China that is the main problem—even with a return of Trump—but the serious economic and security challenges emanating from China and Xi’s implicit support for Putin. Europe’s old China policy playbook, from Trump’s first term—hedge its bets and maintaining a warm relationship with Beijing in case U.S. trade and security policy turn against Europe—will eventually prove to be ineffective regardless of who occupies the White House.
If Trump returns, his trade instincts on China will be even more hawkish than they were before, as reporting from the Washington Post has shown. He will try to force his ideas on Europeans, who should not surrender to his whims. However, Europeans cannot cozy up to China as an alternative. A hawkish stance on China has become a bipartisan consensus in the United States since 2016. President Joe Biden has not overturned Trump’s tariffs, and although he has placed a different emphasis on outcompeting China at home, the protectionist turn in U.S. economic policy toward China will remain. Continued European hedging and closer relations with Beijing would become a liability for Europeans not only when dealing with Trump, but also with the entire U.S. foreign-policy establishment. It’s a strategy that will eventually receive pushback from Washington, D.C.
China has become a formidable economic and strategic competitor for Europe. The days when China was a cheap manufacturing destination for large European companies are gone. China’s export-oriented industrial policies have created a highly competitive domestic market and driven the prices of manufactured goods down, creating a recurring cycle of overcapacity challenges.
China’s prolonged use of both implicit and explicit subsidies now erodes not only the profits generated by European companies in China, but also those companies’ market share at home. For example, the rise of Chinese EV makers means that German automakers will not enjoy the same level of profitability in China and will be rivaled in their dominant position in Europe, and may possibly even lose the competition in their home market to highly competitive Chinese electric vehicles that are made possible partly due to continued subsidies by the Chinese government. European companies need to recognize that there is an expiration date for the current “made in China and for China” business strategy, especially in traditional manufacturing sectors such as automobiles.
And despite European hopes that China can be lured away from supporting Russia’s war against Ukraine, the only success in this regard has been China’s indirect criticism of Russian nuclear threats. Apart from that, China has positioned itself as a pro-Russian mediator, calling for peace talks in Switzerland with Russian participation—and likely on Russian terms. At the same time, China is delivering crucial parts for Russia’s war machine. This support for Russia undermines the security of Ukraine—and thus, by extension, the security of Europe.
In case Trump returns, these alienating forces between Europe and China will not disappear. In the worst case, Europeans will be caught between an unpredictable Trump and a predictably authoritarian and unabatedly assertive Xi.
To prepare for this scenario, European policymakers need a new China playbook that combines a sense of urgency to Trump-proof the trans-Atlantic relationship with a realistic view on China. From China’s perspective, it may seem as if Europeans are just following the United States’ lead on Ukraine, and that if the administration changes to a more Russia-friendly Trump, Europe might be open to follow China’s pro-Russian mediating stance.
Instead, Europeans should make clear to Xi following his trip to Europe that Ukraine’s independence and territorial integrity are fundamental to European security interests, and that they will continue their support for Ukraine—and continue to pressure China to revoke its support for Russia’s war machine—even if Trump returns to the White House and seeks a deal with Putin. (Any such deal can only be disadvantageous for Ukraine as long as China props up Russia’s military.)
Also, on trade policy, Europe should resist pressure to follow Trump’s most hawkish instincts on China. It would be unwise and potentially costly if Europe allowed its relationship with China to be hijacked by a Trump administration. But it should also not allow the payoffs of economic dependence on China to dictate the continent’s long-term economic security and resilience. Europe has to recognize that business opportunities in China are changing—and so too should the business-minded Europeans who condition their relationship with China on preserving existing economic benefits.
Europeans should take so-called de-risking seriously for their own good and actively shape the sectorial exposure and degree of linkage with China. In emerging sectors such as quantum-computing and space technology, where the initial linkage is weak and the risk of empowering the Chinese military outweighs economic benefits, it is much easier to avoid a deepening dependence on China by deploying more advanced regulatory framework, such as investment screening and corporate disclosure requirement. These tools will have a direct impact on filtering out unfair practices and even security threats. Europeans should also leverage the emerging global supply chain redistribution to improve the resilience of the European economy against internal and external shocks.
And if an unpredictable Trump ends up in the White House, Europe needs to leverage its own power toward Beijing. This will only work if it speaks with one voice instead of the contradicting cacophony that China currently hears from the continent—with the European Commission pushing for stricter trade and economic policy, member states working to dilute the commission’s efforts for their own short-term gains, and countries such as Hungary adopting outright Chinese positions on foreign policy questions and criticizing the European Commission for its attempts to create an equal level playing field with China.
It is an encouraging sign that French President Emmanuel Macron invited European Commission President Ursula von der Leyen to Paris during Xi’s visit. But she should not just be a sidekick as she was during Macron’s visit to Beijing, when he posed himself as if he were the leader of Europe. The European Commission and member states should be selective in their economic engagement with China, and they should not be afraid of making controversial decisions.
To this end, the European Union needs to introduce an “offset” mindset to manage the balance of economic interdependence with China across the entire spectrum of issue areas, rather than merely focusing on a small number of industries. Safe-zone cooperation, such as efforts to address global challenges including climate change, could offset stalemates in strategic and security issues.
China does not become a better partner or a more promising opportunity just because Donald Trump might be returning to the White House. Europe correctly sees China as a mixed bag of risks and opportunities. While the current playbook seeks to maximize opportunities, the new playbook needs to prioritize economic risk management and resilience-building—especially with an unpredictable president in the United States—and limit China’s disruptive impact on Europe’s security with its support for Russia’s war. Europeans should start preparing now.
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