← Brussels Playbook Podcast
Brussels Playbook Podcast
China: the 'abusive' partner the EU just can’t quit?
00:40:01
Is the EU finally ready to get serious about China?
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- [00:02]
A
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B
Every day, giant container ships arrive in Europe from China, packed with electric cars, batteries for e bikes and scooters, solar panels, kitchen appliances, smartphones, cheap toys, clothing, etc. Billions and billions of euros of products flowing into European ports. And then many of those containers leave Europe again carrying air. In Brussels, those ships are increasingly becoming a symbol of something much bigger a growing fear that Europe may be turning from an industrial powerhouse into a dumping ground for Chinese made products. That fear is changing the way Europe talks about Beijing. For years, Brussels described China as simultaneously a partner, a competitor and a systemic rival. But lately it's the systemic rival part that's taking over the conversation. This episode drops on the very day the European Commission is holding a major internal debate on China, asking, what do those ships mean for Europe's economy, its industries and its future? Officials inside the commission have been quietly working on new possible ways to push back against what the EU sees as China flooding global markets, undercutting European companies, and using economic pressure as a geopolitical tool. In mid June, EU leaders are expected to take the same debate to a summit in Brussels. And look, the anxiety behind this is all becoming harder to ignore. The ships from China don't just carry cheap products. They also carry pressure on European factories, industrial jobs, and Europe's economic model. That pressure is starting to get political, feeding frustration, distrust of elites, and support for more radical forces. But there's a paradox here too, because Europeans generally like a lot of this Chinese stuff. The electric vehicles coming from China are not just cheaper, they're good. The same goes for solar panels, batteries and electronics. At a moment when Europe is struggling with a cost of living crisis, Chinese products help keep prices lower for consumers and help governments move faster on climate goals. So how does the EU protect its industries without making life more expensive for regular people? How far is it willing to go to push back against China? Is there even anything we can do at this point about the systemic shock, or is it already too late? I'm Sarah Wheaton, host of the Brussels Playbook Weekender, and to help me break it all down, I'm joined by Sandor Tordoir chief economist at the center for European Reform. Dzegosz Stutz, head of the Brussels office at the Mercator Institute for China Studies, or MARIX for short, and I'll call him Greg for short in our discussion. And my colleague, senior mobility reporter and resident China watcher Jordan Dahlia. So before we dive in, I want us to listen to something our producer Dianis prepared. He drew up a short list explaining why Brussels suddenly sounds like it's having a panic attack over China.
- [03:51]
C
Last year, Europe imported almost 360 billion more goods from China than it exported back. Chinese made cars are no longer some niche things in Europe. Roughly one in six electric and hybrid cars sold here now comes from a Chinese brand. China has become the giant of solar panels, batteries, and the processing of critical minerals. Exactly. The industries Europe says are supposed to power its future economy. Also last year, Beijing basically, you guys like critical minerals. What if we stop exporting some of them? And suddenly Europeans realized how dependent they'd become on China for everything from EVs to wind turbines to defense tech. China's factories are now producing so much stuff that the country can't even absorb it all itself anymore. Its manufacturing surplus is approaching $2 trillion. Basically an economy the size of Italy built out of excess factory production. And Europe is already feeling the squeeze. Exports to China falling, Chinese imports rising, factories under pressure, industries hollowing out, hundreds of thousands of industrial jobs at risk.
- [05:09]
B
Okay, so that's the backdrop. It's not hard to see why a recent report from the French prime minister's office called it the Chinese steamroller. So I'm going to throw that to each of you. If you had to describe Europe's economic relationship with China right now with an image or a metaphor or a sentence, what would it be? Greg, you're here in the studio with me.
- [05:28]
D
Thanks a lot, Sarah. Pleasure to be here. I think we're basically dealing with a flood that is coming into Europe's direction right now, and it's really one sided.
- [05:36]
B
Jordan, also here in the studio, what's your image?
- [05:39]
A
I have an image of an abusive partner where it's really hard to walk away, but staying is also not an option anymore.
- [05:47]
B
And Sandra, you had kind of a gastronomic image in one of your papers.
- [05:52]
E
It is very clear in trade data that Germany is amongst the most affected by China's distortions. And so the metaphor that we have spread is that Germany's lunch has already been largely eaten by China and China is about to start on dinner. In other words, the European home market
- [06:10]
B
for Germany we're going to unpack each of your metaphors as we go through the discussion. Greg, let me start with you. I feel like the EU's approach to China has come kind of been all over the place. European countries were eager to sell their products there. And at the beginning of the first Trump administration, Beijing was even seen as a key partner for climate goals when the US pulled out of the Paris Agreement. Then came the pandemic. We had medicine shortages because they were made in China. And in 2023, the EU defined China as, and I quote, a partner for cooperation, an economic competitor and a systemic rival. We heard Ursula von der Leyen talk about de risking not decoupling. And that was seen as a softer touch than the US Totally shut China out of its electric vehicle market. And we even did an episode. Jordan, you were here with us for that on Chinese electric vehicles and EU tariffs back in 2024. And even then, Europe was just kind of dipping its toes into standing up to China on one narrow sector. But listening to Europe now, the mood sounds much darker. So what happened?
- [07:14]
D
Well, I think Brussels is clearly much more alarmed. And I think there are three key reasons for that. First, first, if you take a look at the numbers, they're really bad. We're talking here about 360 billion of euros of trade deficit and we're seeing more pain in terms of job losses in Europe because as China has been evolving, it's been going up the value chain. So they're taking the jobs in Europe. And this is the entire discussion about the industrialization. Some of the estimations are Even talking about 500 manufacturing jobs being lost in Europe every single day. This is really massive.
- [07:47]
B
And when you talk about going higher up the value chain, you know, it used to be that Chinese companies were sending in a lot of like cheap junk, cheap toys and that sort of thing. People are like, who cares? But now it's like actual important technologies, like high end things.
- [08:01]
D
Absolutely. And China has given us no indication of course change. So this is really a systemic issue that is here to stay. China has been more punishing in the context of rare earths, but also with some new of the regulations related to, for example, supply chain security that it has been putting in this year. All of that is happening at the time when we're having much less collaboration with the United States on the topic of China. And in many ways, Washington has actually made issues harder for Europe given the fact that all the tariffs coming from the Trump's White House have led to trade diversion. So I think Brussels is very rightly alarmed with the state of the relationship
- [08:42]
B
with China right now and Jordan. Despite those tariffs that we mentioned on Chinese electric vehicles, they keep coming. How does that possible? And, you know, are we seeing that the Brussels has just realized that its tools aren't strong enough?
- [08:56]
A
It's because their EVs are so much cheaper that they can afford to eat the tariff costs and still sell cars within Europe. And more importantly, they have so much overcapacity that they don't really have a choice because, as Greg mentioned, they're closed off from the American market. There is some demand in Latin America and Southeast Asia, but really the biggest market at its disposal is Europe. But we've also seen them shifting away from pure electric cars to plug in hybrids, which are not covered by the duties and are also very popular with consumers, which works out really well for the Chinese.
- [09:32]
B
So we're hearing the Commission is preparing a whole new toolbox. They may even have already debuted by the time this conversation airs. But so what do we know about it at this point? And how much tough, tougher could this get?
- [09:43]
A
So the Commission tasked DG Trade with coming up with a proposal that would be quite more assertive and effective trade defense policy. They're looking at different options for Europe to really take its fate into its own hands and counteract a lot of these economic measures from China. So there's a couple of different ways that they can do that. There are safeguards where you see that the Chinese are flooding the market with a lot of cheap goods. This would allow the Commission to, to impose emergency tariffs or quotas. When they see that this particular number of goods in one market, like, say, batteries or EVs or clothes, is just soaring through the roof, then the Commission can intervene and stop that flood of goods. There's also the overcapacity instrument, which is a similar sort of concept that basically allows Europe to respond to this big flood of goods because of massive overcapacity
- [10:39]
B
in the Chinese market, where an overcapacity China makes way, way, way, way, way
- [10:44]
A
more than it's consumer want or need. Exactly. And that's really how the Chinese economy runs, where they want to get an industry off the ground. And so there's no safeguards in place, it's just money funneling into it, knowing that the bulk of the companies are going to fail. But it takes time for that to happen. And to your point, Chinese consumers are not going to buy all these goods. They need other markets. Voila, you have Europe. So this instrument is meant to stop that through import restrictions, terrorists quotas. Look, the Commission has wanted to go harder on China for a number of years, but they've been held back by the other member states that are wary of retaliation and angering Beijing and, and what it would do to their industries, Germany being the foremost amongst them. But Germany itself is also shifting its own ideas around China because of the massive toll that all of these imports and the changing trade dynamic has had on its own industries. Just last year, nearly 6% of all automotive jobs in Germany were cut. This is going to be a massive political crisis for Germany.
- [11:53]
B
Yeah, Sander, let's hear more about that from you. You just this month published a paper with Brad Setzer, really looking into GE and particularly their evolution on China, or lack thereof.
- [12:07]
E
I think Germany has had a diagnostic issue in that the country has been embroiled in a deep debate about why its economy has been stagnating for half a decade and is on a trajectory to stagnate for a full decade. And some of the key locuses of the debate is there too much regulation or energy costs too high may have some merit to them. But it is also clear that Germany has lost more than 4% in GDP terms of net exports. And it is clear from research of the Fed and ECB and our research that a large explanatory variable of that is the fact that China's exports now increasingly overlap with Germany's and are therefore essentially pushing German exports out of, first and foremost the Chinese market, but also third markets and increasingly the European home market. And so one of the major drivers of Germany's economic malaise is the second China shock that Greg was describing, namely a China that provides. The simplest way to think about this is that there's a China, which is a very large part of the global economy that is providing a lot of supply and very little demand. Chinese exports writ large in volume terms have increased by 40% over the last few years. Its imports are essentially flat. I mean, there's no growth. So the net result is that German exports to China, which was once a sizable business, are now down by 1% of German GDP. So that is one big piece of the puzzle. And the question that Germany now faces is whether it is willing to join forces with France, also other EU countries, and the Commission to defend the European home market from the flood of Chinese goods that is coming our way.
- [13:50]
A
If I could, please. I feel like Germany illustrates exactly my metaphor of an abusive partnership. Because German industry relied on China for so many years for the bulk of its revenue. It was a Massive cash cow. They earned lots and lots of money that subsidize their factories. So for them, China was great. But now we've seen that relationship shift where they are still heavily reliant on China, not only for sales, but also for innovation. All the companies say we have to be in China because that's where the innovation is happening. If we're not there, we won't know what's going to be coming down and what's going to be available in other markets. But at the same time, China holds all the cards in this relationship to access to what Greg was saying earlier with export controls, raw materials to rare earth magnets. And so the power dynamics have very much shifted and Germany is still sort of stuck in this relationship that it doesn't really want to be a part of, but it has no choice.
- [14:48]
B
Even now, as we record Germany's economy minister is on the ground in China, we've heard Friedrich Merz still float the idea of a trade deal. So what is the prospect for this moving forward in Brussels?
- [15:00]
D
Greg, this is a very big challenge indeed. And it's not just Germany issue. It's also a bigger issue in terms of the general reluctance from some of the member states to really push a more assertive China policy because there is a sense that Beijing is going to push back. The access to the European single market is at this stage existential for Chinese economy. So there will be a pushback. Now, the important thing is that for us in Europe, there is no real alternative to actually taking action. And this is a bitter pill that we're going to have to swallow in order to make a substantial change in terms of the relationship. This is not going to be an easy thing, but something that's really necessary. Now, this relates to the very big fundamental issue that I think we have, which is the question of political will and the political capital for leaders. Because this is a very tall order of an ask that we're putting in front of our political leaders to actually do something that is going to have an economic cost, might push the living costs higher. And this is going to have political implications for you as a political actor. So we are effectively asking European leaders to exercise statesmanship. This is the very big, I think, actionable call for Europe to take our fate into our own hands in many ways right now. And there are two alternatives how this could play out. We can do things now, expect retaliation, trying to deal with it, trying to build credible deterrence, or the alternative is to wait, where Beijing may try to push the retaliations under the threshold of our response or simply the timeline is just not going to work to our favor because over time we'll be losing as Europe the ability to respond in terms of also the jobs lost. But similarly, if you're going to have a change in political governments to more nationalistic actors across Europe, it's going to be harder to come together. So in many ways, the time to act is now.
- [17:01]
B
On that point of escalation, are there any lessons that the EU could learn from Washington's approach to China? We've heard French President Emmanuel Macron making some points along these lines.
- [17:13]
D
I would say that we definitely have to go the European way. I think it's also very important that we do stay true to our way of dealing with things according to the rules and processes that we do put in place. We have to be much more agile with putting those tools in place. But this is to me exactly the fundamental issue. Our biggest challenge is not necessarily just the lack of tools. It's a question of making them and putting them into use. We haven't, for example, used the anti coercion instrument last year when the critical raw materials licensing has been taking place.
- [17:49]
B
That's what we call the trade bazooka here in Politico.
- [17:52]
D
Exactly. But in many ways this trade bazooka is inherently political. If you get the qualified majority voting of the member states to actually agree that coercion has taken place, it's still such an open ended instrument that deciding what you do is going to be largely a political choice. So it's really important that we do build credible European deterrence. The tools are largely there. It's really about making use of them.
- [18:20]
B
Well, but I mean, if the US has had success just blocking Chinese electric vehicle equipment, I mean, yeah, why don't we just do that in Europe?
- [18:27]
A
We don't have the tool to do it. The US used national security grounds to block EVs and other Chinese imports. We don't have that mechanism in Europe. That is a competency that lies with the member states. And so the Commission is quite limited on what it can do there. But even more so politically, that would not fly here. You're going to have multiple countries that say that is too far. We don't want to go that route because they're also getting investments from the Chinese. So it's a bit of a web of who has the most to benefit and who has the most to lose. And those are two very big competing interests. And that's going to be what really drives this conversation and where this goes.
- [19:07]
B
Well, yeah, and staying with that, I wanted to. To ask you about an article that, that you're working on and the thesis is a bit provocative. It's that Spain is the new Hungary. And of course under Orban, Budapest was very open to Chinese investment, to Chinese factories. Pretty much all European countries could use the ca. So can you unpack this kind of trend that you're seeing and tell us about Spain and Sanchez?
- [19:30]
A
Absolutely. So some history. Hungary for years courted Chinese investments and they have had massive factories built up there all around batteries and a couple of EVs. Spain is diversifying a little bit. They have a number of battery factories, but they also have a number of automotive factories. Now for a sector that is bleeding jobs across the continent, that's really big. And these are good jobs. These are jobs that have higher salaries, good benefits. They're jobs that you want. So from Spain's perspective, yeah, this is great. Helping with the unemployment rate, it's bringing money in. Sanchez has made four trips to Beijing over the past four years. So he's really been laying the groundwork for these investments. And every time he goes, he gets a little bit more. But as with everything with China, this comes with strings. These are not free investments. And so China expects Spain to have its interests in mind during these Council debates. It is taking a divide and conquer approach, like it always has, of who can we get to be our ally in these discussions and make sure that this goes in a direction that we would support.
- [20:39]
D
If I can just add one point, fully agree that Spain has been very active in terms of acquiring those investments and the efforts by Prime Minister Sanchez. But we also have to acknowledge the kind of dynamic between the outreach to Beijing and also what the member states are doing behind those doors. Right. We had this joint paper that came to the commission ahead of the Security College from France, Italy, Spain, Netherlands, Lithuania, really asking for tougher measures. So there is also this push behind closed doors for actually making use of European measures more intensely. And it really reminds me of something that one of the Chinese diplomats once told me, that if you want to find trouble, go to Brussels. If you want to make trouble, go to the capitals.
- [21:27]
A
No kidding.
- [21:28]
E
I think there are two issues that Madrid should keep in mind. The first issue is that China's own history strongly suggests that you get meaningful investment, including technology transfer, local employment, if you also set the incentives right. In other words, just courting Chinese FDI for the sake of courting Chinese FDI without having barriers in place and local content requirements, let's say an automotive for the batteries to drive trains to also be built in Spain or Europe will probably yield Chinese factories that are essentially assembling embedded Chinese content with little value add and little positive technical spillovers for the Spanish economy as a whole. The other concern I would have is that also for Spain, even if some of the investment is welcome, a world in which Europe is growing increasingly reliant in a one sided way on Chinese supply is a world in which Beijing can over time impose even more dependence on the basis of existing dependence. In other words, there is a real political cost, a loss of strategic autonomy the longer Europe waits because as Greg said, at this stage Europe still has also a decent amount of leverage over China, including in the form of ASML machines.
- [22:47]
B
This is the chips supply chain, chip
- [22:49]
E
supply chain player, the chip making equipment that comes primarily from the Netherlands, but it's a European ecosystem. But there are other examples like aircraft engines and the Commission has mapped those dependencies and should not be afraid to deter China from engaging in supply chain warfare on Europe to come to escalate, to de escalate scenario in order to rebalance the relationship. The alternative is waiting and doing little. And I am afraid that that means that over time Europe's hand at the poker table weakens and does not strengthen.
- [23:22]
B
Okay, this is a lot. We're going to take a quick break and we'll be right back.
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A
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- [24:00]
B
To your point about, you know, strategic autonomy, independence and just thinking of an area where Spain is very much not the next to Hungary. You know, we see a lot of Sanchez warmth towards Beijing coming as he has an increasingly confrontational relationship with Washington. How is this interplay of sort of Europe feeling more threatened by the U.S. how is that playing into the thinking in Brussels?
- [24:27]
D
Greg, I think that the discussion that we have about strategic autonomy really has to acknowledge that Europe finds itself between a rock and a hard place. A solution to a rock is not getting closer to the hard place. You really need to work on both at the same time and really exercise the agency. This is also something that China has been consistently already for years been using and leveraging the debate related to strategic autonomy to try to drive the wedge into the transatlantic relationship. China has been talking about this, quote, unquote, correct understanding of strategic autonomy. So this is exactly Beijing's line, that the way to exercise strategic autonomy for Europe is getting closer to China, to limit the dependence on Washington. But this is not the way that this is discussed in Europe. Also, the relationship with us has been challenging in the context of China policy, because, for example, to make sure that the Security College manages to meet and actually discuss China. It was already postponed because of the energy crisis before the discussion on China was delayed because of Greenland. Generally speaking, the political pipeline has been largely devoted to dealing with issues coming to Europe in the context of Trump administration's activity. So I think there is also that challenge. And the US element is at play in terms of Europe's China policy.
- [25:52]
E
We should also keep in mind the US is not a monolith. I think Trump's appeasement to China is controversial within his own party, but certainly also amongst Democrats, many of whom foresee a world in which the US continues to compete with China, in part by aligning more closely with partners and allies like the eu, just for self interest, because they need the industrial and market scale that allies can bring. And so in the long run, this may not be the actual equilibrium that we're in. And I would flag that even under the Trump administration, there's been a real keenness on the part of Jamison Greer, the Trade minister, on the part of Scott Besant, the finance minister, to bring Europe into a critical raw minerals club. And that club may be the nucleus of more collaboration in batteries and other sectors over time. So you could kind of rebuild some of the transatlantic economy that's been somewhat damaged by tariffs, but not completely derailed over time.
- [26:51]
B
Yeah, and it's been damaged by tariffs, and it's also been damaged by Trump's abandonment of NATO and national security is. Is driving a lot of Europe's trade strategy and economic thinking. Jordan, the other thing that we've seen over the years are these debates about Huawei, concerns about Chinese hacking. Is Europe doing anything to confront Beijing on these issues? I mean, I think of Huawei, it's the same thing. They make a great cheap product, amazing customer service.
- [27:21]
A
Yeah.
- [27:22]
B
Maybe gives Beijing all your data, but, you know, the price is right.
- [27:26]
A
Exactly. But it goes far beyond just giving data to the Chinese. Huawei is not just a telecom company. They're also very big in solar panel inverters. They hold the bulk of the market, and that is massive in Europe. But there are real cybersecurity risks to this researchers warn that they can have remote access, they can remote in and actually sabotage these inverters. So you're looking at something like the power outage that happened in Spain on a massive scale. So that's sort of the risk that we are looking at. But as with many things, that competency lies with the member states. So the Commission proposed the Cybersecurity act and did all but name China as the main focus of it. But it really lies on the member States that actually implement that. So we are only as strong as our weakest link on cyber security.
- [28:16]
B
And I would just say having, having spoken with Huawei many times, they would say that they are just a private company, they're not interested in politics. They, they're just here to provide good technology.
- [28:25]
A
They're just here to sue their way back into lobbying firms and play, play nicely with everyone.
- [28:33]
B
Jordan, just staying with you. You know I mentioned a lot of people who buy why we products dislike them and likewise I like buying things that cost less as opposed to those that cost more. And the Chinese are great at supplying that for reasons we've discussed, you know, lower regulation, overcapacity and state the support for companies. And to the point that you all have been making as well, the Chinese are producing things that we really need to meet other goals, such as our climate goals, solar panels, electric vehicles. And this is what we have been discussing about EVs this whole time. We want consumers to make this shift. We need to go through an energy transition. China is supplying these things. Likewise, everybody's hurting from the cost of living crisis. So even if it's just regular consumer goods. Yeah, we're getting cheap stuff from China. So if European policymakers want to come in and really shut China out, people are going to miss what they're selling.
- [29:28]
A
Absolutely. I mean I'm going to miss it. Who can afford full price goods these days? I don't think anybody can. But that's what the trade off that Greg was talking about earlier. It's short term pain for longer term gain. And that's what the Commission is having to struggle with right now of yes, prices will go up that you're talking about everything from like kitchen goods to phones to clothing, cars, we have really surrendered our industrial capacity to China. And so at some point in time this equation was going to come and we were going to have to make this choice. It's a bit of a Sophie's choice. But there are ways in which the Commission is looking to safeguard industries and build up capacity. That's what a Lot of the Industrial Accelerator act that Sejeuner, the French commissioner put forward is aimed at doing. It implements European requirements for exactly these clean technologies, solar panels, wind batteries, EVs. This is just the beginning of the negotiations. So we're still in very early days. There are of course questions of does this go far enough. But policymakers are aware of this, Sophie's Choice, and they are trying to correct it.
- [30:44]
E
Can I maybe jump in on the cost issue?
- [30:46]
B
Yes, Senator, please go ahead.
- [30:47]
E
I mean, it's very understandable that there's a focus on cost. And I think the framing as are you willing to take some short term pain for long term gain, both economically and in terms of strategic autonomy. In fact, the Belgian Prime Minister, Barta Wever wrote a letter to the Commission president underlining this point that he thinks Europe should take the short term pain. But the short term pain is not across the board. I don't think the EU is planning to put tariffs on cheap Chinese consumer electronics or iPhones or furniture. I think what we're talking about here is the industrial core of Europe. Cars, machines, chemicals, steel has already been defended. So I think we need to keep that in mind. It's not a broad, across the board, sort of American style trade war. It is something more narrow. And if you take those three sectors, it's about 300 billion in imports that the EU brings in from China. Let's say you put a 40% is an extreme scenario, 40% tariff on them, you're looking at a pay as you go bill of 120 billion. That sounds like a lot. But the EU is a more than 20 trillion economy, so it is like 0.6% of GDP. It hurts, but it is the kind of scale, just to put it in perspective, that you're looking at. And that is consistent with what we know from Trump won and Biden's attempts to onshore some manufacturing and the inflation costs, which are clear. They're also not necessarily enough to bring down the whole European economy. What's more risky is that China hits back with supply chain constraints on rare earths. And so Europe needs to have a deterrence strategy that is credible to avoid that type of escalation and make clear to China that we still want to trade with them in many areas. But we do also have to defend our industrial base.
- [32:33]
B
Greg, what are your ideas for how to confront this?
- [32:36]
D
I think there are a few things that we can do. I think for all those challenges that we discussed, we also, first of all shouldn't fall into doom and gloom. There are things that Europe can do, should do. There is still a lot of agency that Europe has. It's really about getting our act together. First, there is the question of new tools, some of the ones that you already alluded to, the Cybersecurity act, the Industrial Accelerator act that are now in the pipeline. And there has already been pushback from Chinese side in terms of formal letter to the Commission, lobbying the business groups. I think it's very important that we keep this discussion aimed at getting very ambitious instruments. It's not about decoupling from China. It's really about making sure that we're also able to discuss and negotiate with China from the position of relative strength. It's also about using the tools that we already have and Member states actually implementing. And more broadly, it's also about partnering. This is really not an issue that is just an EU story. If we think about the fact that China is now responsible for around 30% of global production but only 13% of global consumption, we're looking at a situation where it's really a quarter of those industrial companies in China are loss making. This is about stability of global economy. This is also about other actors, not necessarily only developed economies, but also the developing economies or the ones that are really in the process of industrializing. They're also being affected by this. And some of the research that was done by my colleagues pointed to the fact that 52 out of 70 largest economies put measures in place in 2025. The new trade defense measures vis a vis China. There are plenty of people that we can talk to, plenty of people that we can work with as Europe. But we have to be ready for the fact that Beijing is going to respond not necessarily by using the strongest measure at its disposal, the nuclear weapon of rare earths. There are many different ways that China can target individual companies. They have a lot of information thanks to the licensing for example process. In many ways, Beijing knows more about European companies than European governments. This is very challenging situation where I think we need to be preparing not only for a massive response that can trigger political reaction on the European side, but also more targeted ones. So it's a very challenging discussion. It's really about making sure that we can increase European pain thresholds in terms of basically bearing this, being more resilient and making sure that deterrence is really a thing vis a vis China because deterrence is prerequisite of resilience building.
- [35:21]
E
I would just echo Greg's very important observation that the vast majority of the world shares Europe concern. The overall takeaway is Europe has a lot of trade, defense instruments already. But the core issue, as I think all of us have said in one way or another on this conversation, is whether Brussels, and most importantly the EU member states are willing to actually deploy some of the tools and not build new ones which then sit in the closet unused as bazookas that everybody knows are there, but somehow they never actually get loaded to achieve real economic and political objectives.
- [35:58]
B
I mean, look, we've been talking about the economics, we've been talking about consumer sentiment, but of course we're having elections coming up in Europe, some very key ones in the coming years. Jordan, what's at stake for political leaders who are facing elections from mainstream parties in the decisions that they're making today?
- [36:18]
A
Massive implications. We've seen the rise of the far right all across Europe. It's happening also in Germany. And the people that I talk to see parallels between the rise of the far right in Europe and, and the rise of Trump in the US and what led to Trump in the US was a decline in manufacturing, decline in coal mining jobs, client manufacturing jobs. But these were not even really good jobs. They came with a lot of health risks. The pay wasn't great and they weren't quite to the scale that we're seeing in Europe. But that breeding ground led to the Tea Party and then ultimately the rise of Trump. What you're seeing in Germany and in other countries in the EU is at a much bigger scale. You're seeing more job losses and more critically, these are really good, high paying jobs that people really value. And if you saw that in the US lead to Trump, what is that going to lead to in Germany and in Poland, Slovakia and Czechia and anywhere else? So that's really what is at stake here. And you've seen the far right capitalize on that and use it as a talking point in their campaigns. You have the Motorist Party in Czechia. Their whole platform was around cars and the fact that this combustion engine ban, that is a completely different sort of topic, but it kind of gets to the root of overall competitiveness within Europe and this sort of angst that people have about not having job security. Things are really changing. They don't know what the future holds and they're capitalizing on that fear and using it to their advantage.
- [37:54]
B
And it's interesting that the C word, competitiveness, actually is only coming up now in this discussion. Of course, the EU's efforts to, to increase its competitiveness were meant to be targeted at both the US and at China. And we're seeing that those more sort of positive efforts haven't been working. So now they're they're going to more kind of confrontational negative efforts.
- [38:13]
A
Absolutely. And more protectionist efforts, which is really a first for Europe.
- [38:17]
B
Okay. So we're going to leave it there. Sandra, Greg, Jordan, thank you so much for joining me.
- [38:21]
A
Thanks for having us.
- [38:23]
D
Thank you.
- [38:24]
E
Thanks so much.
- [38:28]
B
Okay, that's all from us this week. A huge thank you to our guests Sandra Tordoir from the center for European Reform, Greg Stets from Merix, and my colleague Jordan Dahl. As always, if you have thoughts, questions, tips or strong opinions about Europe, China, electric cars, industrial policy, anything else we discuss today, send us a message or a voice note on WhatsApp. You'll find the number and the link in the show notes. And make sure to subscribe to the Brussels Playbook podcast. That's the feed where the Weekender lives. Thanks to Deanna Sturris, our supervising audio producer, and to audio producer Saga Ringmar. I'm Sarah Wheaton. See you next week.