BRUSSELS — After its defeat by the British in the First Opium War, the Qing dynasty signed a treaty in 1842 that condemned China to more than 100 years of foreign oppression and colonial control of trade policy.
It was the first of what came to be known as “unequal treaties,” where the bullying military and technological heavyweight of the day imposed one-sided terms to try to slash back its massive trade deficit.
Sound familiar? Fast-forward nearly two centuries, and the EU is starting to understand exactly how that feels.
European Commission President Ursula von der Leyen’s dash to Donald Trump’s Turnberry golf resort in Scotland last month to seal a highly unbalanced trade deal has raised fears among politicians and analysts that Europe has lost the leverage that it once thought it had as a leading global trade power.
Von der Leyen’s critics were quick to assert that accepting Trump’s 15 percent tariff on most European goods amounted to an act of “submission,” a “clear-cut political defeat for the EU,” and an “ideological and moral capitulation.”
If she had hoped that would keep the U.S. president at bay, a rude awakening was in store. With the ink barely dry on the trade deal, Trump doubled down on Monday by threatening to impose new tariffs on the EU over digital regulations that would hit America’s tech giants. If the EU didn’t fall into line, the U.S. would stop exporting vital microchip technologies, he warned.
His diatribe came less than a week after Brussels believed it had won a written guarantee from Washington that its digital rulebook — and sovereignty — were safe.
Trump can wield this coercive advantage because — just like the 19th century British imperialists — he holds the military and technological cards, and is well aware his counterpart lags miles behind in both sectors. He knows Europe doesn’t want to face Russian President Vladimir Putin without U.S. military back-up and can’t cope without American chip technology, so he feels he can dictate the trade agenda.
EU Trade Commissioner Maroš Šefčovič strongly implied last month that the deal with the U.S. was a reflection of Europe’s strategic weakness, and its need for U.S. support. “It’s not only about … trade: It’s about security, it is about Ukraine, it is about current geopolitical volatility,” he explained.
The trade deal is a “direct function of Europe’s weakness on the security front, that it cannot provide for its own military security and that it failed to invest, for 20 years, in its own security,” said Thorsten Benner, director at the Global Public Policy Institute in Berlin, who also pointed to failures to invest in “technological strength” and to deepen the single market.
Just like the Qing leadership, Europe also scorned the warning signs over many years.
“We are paying the price for the fact we ignored the wake-up call we got during the first Trump administration — and we went back to sleep. And I hope that this is not what we are doing now,” Sabine Weyand, director-general for trade at the European Commission, told a panel at the European Forum Alpbach on Monday. She was speaking before Trump’s latest broadside on tech rules.
It is clear that Trump’s volatile tariff game is far from over, and the 27-nation bloc is bound to face further political affronts and unequal negotiating outcomes this fall. To prevent the humiliation from becoming entrenched, the EU faces a huge task to reduce its dependence on the U.S. — in defense, technology and finance.
Stormy waters
The Treaty of Nanking, signed under duress in 1842 aboard the HMS Cornwallis, a British warship anchored in the Yangtze River, obliged the Chinese to cede the territory of Hong Kong to British colonizers, pay them an indemnity, and agree to a “fair and reasonable” tariff. British merchants were authorized to trade at five “treaty ports” — with whomever they wanted.
The Opium War began what China came to lament as its “century of humiliation.” The British forced the Chinese to open up to the devastating opium trade to help London claw back the yawning silver deficit with China. It’s an era that still haunts the country and drives its strategic policymaking both at home and internationally.
A key factor forcing the Qing dynasty to submit was its failure to invest in military and technological progress. Famously, China’s Qianlong Emperor told the British in 1793 that China did not require the “barbarian manufactures” of other nations. While gunpowder and firearms were Chinese inventions, a lack of experimentation and innovation slowed their development — meaning Qing weapons were about 200 years behind British arms in design, manufacture and technology.
Similarly, the EU is now being punished for falling decades behind the U.S. Slashing defense spending after the Cold War kept European countries dependent on the U.S. military for security; complacency about technological developments means the EU is now behind its global rivals in almost all critical technologies.
U.S. Trade Representative Jamieson Greer, for his part, has declared the beginning of a new world order — one he dubbed the “Turnberry system” — comparing the U.S.-EU trade accord to the post-war financial system devised at the New England resort of Bretton Woods in 1944.
Turbulence ahead
With his attack on Monday, Trump demonstrated scant regard for the EU’s desire to bracket out sensitive issues from last week’s non-binding joint statement. The vagueness of the four-page text, meanwhile, leaves room for him to press new demands or threaten retaliation if he deems the EU is failing to keep its side of the bargain.
More humiliation could follow as the two sides try to work out various details — from a tariff quota system on steel and aluminum to exemptions for certain sectors — that still need to be settled.
“This deal is so vague that there are so many points where conflicts could easily be escalated to then be used as justification for why other things will not follow through,” said Niclas Poitiers, a research fellow at the Bruegel think tank. Asked what would happen if the EU were to fail to invest a pledged $600 billion in the U.S., Trump said earlier this month: “Well, then they pay tariffs of 35 percent.”
It’s a danger the EU is acutely aware of. The European Commission argues the $600 billion figure simply reflects broad intentions from the corporate sector that can’t be enforced by bureaucrats in Brussels.
But Trump could well use the investment pledge as a trigger point to gun for higher duties. “We do expect further turbulence,” said a senior EU official, granted anonymity to speak candidly. But “we feel we have a very clear insurance policy.” What’s more, by accepting the agreement, sold by the EU executive as the “less bad” option following Trump’s tariff threats, Brussels has also shown that blackmail works. Beijing will be watching developments with interest — just as EU-China ties have hit a new low and Beijing’s dominance on the minerals the West needs for its green, digital and defense ambitions hand it immense geopolitical leverage.
Escaping irrelevance
But what, if anything, can the bloc do to avoid prolonging its period of geopolitical weakness?
In the lead-up to the deal, von der Leyen repeatedly emphasized that the EU’s strategy in dealing with the U.S. should be built on three elements: readying retaliatory measures, diversifying trade partners, and strengthening the bloc’s single market. For some, the EU needs to see the deal as a wake-up call to usher in deep change and boost the bloc’s competitiveness through institutional reform, as outlined last year in landmark reports penned by former European Central Bank head Mario Draghi and former Italian Prime Minister Enrico Letta.
In response to the deal, Draghi issued a strongly-worded warning that Trump’s evident ability to force the bloc into doing his bidding is conclusive proof that it faces irrelevance, or worse, if it can’t get its act together. He also played up the failings on security: “Europe is ill-equipped in a world where geo-economics, security, and stability of supply sources, rather than efficiency, inspire international trade relations,” he said.
Eamon Drumm, a research analyst at the German Marshall Fund, also took up that theme. “Europe needs to think of its business environment as a geopolitical asset to be reinforced,” he said.
To do so, investments in European infrastructure, demand and companies are needed, Drumm argued: “This means bringing down energy prices, better putting European savings to use for investment in European companies, and completing capital markets integration.”
In comments to POLITICO, French Europe Minister Benjamin Haddad also called for “investing massively in AI, quantum computing and green technologies, and protecting our sovereign industries, as the Americans do not hesitate to do.”
Free trade
For others, the answer lies in deepening and diversifying the bloc’s trade ties — Brussels insists the publication of its trade deal with the Mercosur bloc of South American countries is just around the corner, and it is eyeing deals with Indonesia, India and others this year. It has also signaled openness to intensifying trade with the Asia-focused CPTPP bloc, which counts Canada, Japan, Mexico, Australia and others as members. “In addition to modernizing the [World Trade Organization], the EU must indeed focus on continuing to build its network of trade agreements with reliable partners,” said Bernd Lange, a German Social Democrat who heads the European Parliament’s trade committee.
“To stabilize the rules-based trading system, we should find a common position with democratically constituted countries,” Lange added.
Europe, Drumm said, faces a choice.
“Is it going to reinforce its position as a hub of free trade in a world where globalization is unwinding?” he asked. “Or is it just going to be a battlefield on which increasing competition between China and the United States plays out?”
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