The incoming Trump team is convinced that the EU’s China policy is too slow and indecisive. But the EU has a chance to exert influence if it moves swiftly to make a ‘China pitch’ focused on ‘three Ts’: trade, tech and Taiwan.
The contours of the new US China policy …
President-elect Donald Trump wants to break with Biden-era policies in most fields, but not necessarily on China. His aides proudly claim that President Biden’s approach is a continuation of Trump’s first-term hawkish policy. The incoming president himself is famous for his erratic policymaking style. But he also holds two contradictory convictions that shape his thinking on China. In other words, given competing impulses and potentially conflicting views among his aides, Trump has yet to formulate a clear China policy.
On the one hand, Trump’s deep scepticism of alliances may lead him to treat China like any other country. Trump could be inclined to act pragmatically and seek a top-down understanding in leader-to-leader exchanges with China’s President Xi Jinping. For example, on the campaign trail, Trump took a transactional approach to the conflict over Taiwan. Such a policy could involve striving for another ‘China deal’ following the ‘Phase One deal’ that Trump concluded with Beijing in his first term. Interestingly, Trump has not hinted at such a deal, possibly because many in his team, including Robert Lighthizer, consider the previous deal a failure.
For the EU, a deal-making Trump bears enormous risks. Initially, Trump might be inclined to call on Europe to team up and put pressure on China. However, unlike during his first term, China would likely retaliate, and Europe is more vulnerable to such repercussions than the US. Once the negotiations have started, Trump could insist on favourable conditions for US firms’ access to the Chinese market, placing European competitors at a distinct disadvantage.
For the EU, a deal-making Trump bears enormous risks.
On the other hand, Trump’s fixation on trade imbalances could lead him to prioritise tackling the trade deficit. Trump’s trust in tariffs would make another trade war unavoidable. The goal of such a China policy, likely to be supported by Trump’s hawkish China team, is not to pressure Beijing into a new deal but to curtail Chinese influence and preserve US pre-eminence. In the same context, Trump’s aides consider continued or even increased US support for Taiwan to be of crucial strategic importance.
In this scenario, the EU risks being overtaken by US unilateral action with grave consequences for its prosperity: market access in the United States could increasingly require ‘China-free supply chains’. European companies could also be confronted with US export restrictions unless they decouple from China. In reaction, China could step up ongoing localisation efforts. This would shrink EU firms’ sales opportunities in both markets. On top of this, as Chinese access to the US market would be more difficult, the country’s excess manufacturing capacity would target Europe even more than it does today, hurting European competitiveness and jobs.
… and how the EU can influence it
Trump’s China policy might oscillate between these two convictions during his second term. The EU will need to monitor how US China policy is unfolding and be prepared for policy disruptions.
However, at the beginning, Trump is likely to lean towards the second, more hawkish approach. To avoid being outpaced by a hawkish, unilateral US China policy, the EU should seize a brief window of opportunity to make a convincing pitch, because transatlantic cooperation on China could also be beneficial to the incoming Trump government. The only effective means to change Chinese behaviour is through the use of power. US leverage over China would increase enormously if it successfully coordinated with the EU and other G7 partners. This is why a ‘China pitch’ is one of the policy areas where the Trump team could see immediate benefit in transatlantic cooperation. But to convince the incoming government, the EU will need to quickly present a clear and decisive pitch to counter the prevailing perception of the EU being slow and indecisive.
The perception of China as a systemic rival is increasingly shared on both sides of the Atlantic. The latest example is last week’s hearing of incoming HR/VP Kaja Kallas at the European Parliament, when she described China as increasingly emerging as a competitor and systemic rival, against which the EU needs to de-risk. China’s support for Russia’s aggression against Ukraine has accelerated the EU’s hardening perception of Beijing. President von der Leyen’s new Political Guidelines provide concrete opportunities for a pitch towards the US focused on the ‘three Ts’: trade, tech and Taiwan:
Trade: Both transatlantic partners and many countries in the Global South have witnessed enormous growth in Chinese imports. The reason is massive industrial overcapacity in China. Low domestic demand inside China cannot absorb widely subsidised production. The resultant overcapacities distort global markets. This poses a serious risk to prosperity in both the US and the EU. Building on its promise to develop ‘economic security standards’ with its like-minded partners, the EU and G7 partners could offer the US a joint comprehensive framework with multiple criteria aimed at reducing trade distortion of strategic goods.
Technology: By ramping up its economic security efforts, the EU could coordinate high-priority risks with the US and make sure mitigating measures are more tailored to specific risk profiles. For example, a shared and nuanced understanding of the risks arising from China’s growing capacities in mature node semiconductors would help ensure that both partners do not outmanoeuvre each other and backfill when tackling Chinese supply. Similar coordination would be beneficial in the area of connected vehicles. Another example is information sharing on the risks of technology leakage to Chinese actors with close ties to the People’s Liberation Army. Operational cooperation in fields such as export controls as well as inbound and outbound investment screening is a priority for the incoming Trump team.
Taiwan: For the first time, the EU’s new Political Guidelines explicitly commit to ‘deter’ China from changing the status quo in the Taiwan Strait by force. While Trump is transactional about Taiwan, many in his team are strong supporters of Taipei. The EU should insist on ‘single theatre thinking’ emphasising how a Russian victory in Ukraine would embolden China in the Pacific. Within the framework of its ‘preparedness agenda’, the EU could support Taiwan in improving its crisis prevention capabilities. Curbing the leakage of European dual-use technologies to China would also align with US interests.
The EU should insist on ‘single theatre thinking’ emphasising how a Russian victory in Ukraine would embolden China in the Pacific.
A European ‘China pitch’ focusing on these ‘three Ts’ can only be successful if it is presented swiftly. Otherwise, Trump will likely revert to unilateral action – causing enormous collateral damage to the EU.
