Watching China in Europe—February 2025

American Excess

Bouts of American excess have shaped the 21st century. There was George W. Bush’s war of choice in Iraq, which cost the United States trillions of dollars, killed hundreds of thousands, and gave rise to a new age of jihadist terror. Half a decade later came the global financial crisis, fueled by the predatory lending practices of US financial institutions and gaping holes in regulatory oversight. These self-inflicted disasters continue to haunt the United States to this day. They deepened inequalities in American society, triggered an isolationist backlash, and provided fuel for populists who have ushered in a poisonous era in the country’s politics. 

Enter Donald Trump, whose assault on the underpinnings of US democracy, unfolding trade war with allies and adversaries alike, and bizarre nostalgia for the American expansionism of the late 19th century, signal a new era of overreach. It is likely to end badly for the United States and what we used to call the West. This, at least, is how capitals across Europe are seeing the first weeks of Trump’s second term. The 25% tariffs due to be imposed on Canada and Mexico this week (before reports of a reprieve surfaced) give Europeans a foretaste of what is to come: a highly volatile trade battle between Washington and its closest allies at a time when deeper cooperation to confront the economic and security challenges posed by China and Russia is more pressing than ever.

Tariff Tumult

If this is all part of a master plan by Trump and his team to convince recalcitrant American partners to shoulder a greater defense burden and reduce their trade surpluses with the United States, then fine. Instead, it looks chaotic and confused. Officially, Trump’s new tariffs—including 10% levies on China—are the response to a national emergency resulting from the flow of immigrants and fentanyl into the United States. And yet Trump himself has declared that the tariffs are not a negotiating tool to convince Canada, China, or Mexico to adopt certain policies, but rather a “pure economic” measure to reduce trade deficits. The purpose of the tariffs, it seems, is in the eye of the beholder. No one can say for sure what the administration’s endgame is, beyond satisfying the MAGA faithful. If surging inflation is the result, it will be difficult to blame it on Joe Biden or diversity, equity, and inclusion (DEI) policies. 

Europe, Trump has warned, is next. “We’ll be doing something very substantial with the European Union,” he told reporters at the end of last week. It seems unlikely that Brussels can do anything to prevent tariffs. European leaders have already signaled that they are ready to ramp up defense spending and purchases of American energy and military equipment to reduce their trade surplus with the United States. The concern in Brussels is that this won’t be enough. Greenland is on the table, as is EU regulation of US digital platforms owned by Trump’s new cadre of sycophants. The president is also expected to demand tougher policies toward China, even as he sends signals that he may want to do a deal with Beijing. As one EU official told me, “It will be a problem if the US message is ‘You are going do what we want on China, but we will pursue a deal with Beijing and hit you at the same time.’”

Losing Europe

It is already clear that the Trump administration is downgrading the EU as an interlocutor in favor of direct engagement with the member states it considers like-minded. How else to explain the fact that Trump’s new secretary of state, Marco Rubio, took so long to call the EU’s top diplomat, Kaja Kallas, or that European Commission President Ursula von der Leyen recently decided to recruit Italian Prime Minister Giorgia Meloni’s former G7 sherpa and intelligence chief, Elisabetta Belloni, to be her top diplomatic adviser. Von der Leyen, whose team developed an unusually close relationship with the Biden White House, has been unable to get a meeting with Trump. Her new commissioner for trade and economic security, Maroš Šefčovič, has received an invitation from his Chinese counterpart, Wang Wentao, to visit Beijing. Commission officials would prefer that he go to Washington first. But there have been no signs so far that Trump’s trade team, which is still awaiting Senate confirmation, is ready to talk. “To Trump, we are the ultimate deep state,” the EU official said.

And so, Europe is tentatively preparing to pivot. I was told that early versions of von der Leyen’s speech at the World Economic Forum annual meeting in Davos in late January were quite hawkish on China. At the last minute, however, she decided to include a sentence describing this year’s 50th anniversary of EU relations with the People’s Republic of China as "an opportunity to engage and deepen our relationship with China—and where possible even to expand our trade and investment ties". The change in tone took some senior officials in Brussels by surprise. But Šefčovič repeated the line at a hearing of the European Parliament’s trade committee last week, a signal that the softer messaging may be here to stay. “We are not going to fight a two-front trade war,” one EU diplomat said, when explaining the new language on China. A Commission official added: “We have to work with the two legs of the triangle. We are not saying we will jump back into bed with China. But it is a signal to the US that they can lose Europe.” If the Trump administration isn’t careful, Europe could come to view Washington as a greater threat than Beijing.

Early and Hard

In the event Trump hits the EU with tariffs, Brussels is ready to respond with “something that hurts”, I was told in Brussels last week. I detected no appetite in the EU’s capital for compromise with Trump and the tech bros on the regulation of US digital platforms. After opening proceedings against TikTok in December for allegedly facilitating foreign interference in the since-cancelled Romanian election, officials have asked X to provide details about its algorithm by mid-February. The fear is that owner Elon Musk, who has been lobbying aggressively for the Alternative for Germany (AfD) for months, could use the platform to boost the far-right party in the German election on February 23. Some officials, I learned, are pushing the Commission to hit X early and hard to send a signal to Washington that its position on social media platforms is nonnegotiable. Watch this space.

While von der Leyen was softening her message to China, Friedrich Merz, the conservative frontrunner in the German election, was doing the exact opposite in a foreign policy speech he gave in Berlin two days after her appearance in Davos. I was told that Merz intervened personally to sharpen the language on China. In the speech, he lumped China, Russia, Iran, and North Korea together in an “axis of autocracies” and spoke of a “systemic conflict” between liberal democracies and authoritarian states. A German diplomat described it as more hawkish than any speech that has been given by members of the outgoing Olaf Scholz government, including Foreign Minister Annalena Baerbock, in recent years.

Sacred Cows

What does it signal about how German policy toward China could change in a government led by Merz? My expectation is that on matters directly relating to security, we will see a sharper tone. Merz, for example, could be more supportive of EU sanctions against Chinese entities that are supporting Russia’s war in Ukraine. He could back a more robust role for Europe in the Indo-Pacific. And he could speak out more forcefully about Beijing’s creeping threat to Taiwan. Where Germany’s economic interests are concerned, however, it is uncertain that Merz would lead to meaningful change. Don’t bet on accelerated de-risking from Germany. It is positive that he is pushing for the creation of a national security council that could help break down the foreign policy silos in Berlin. It is also encouraging that he is talking about closer coordination with European partners, a glaring weakness under Scholz. 

But is Merz prepared to think big, using the dire state of Germany’s economy and the worrying vulnerabilities in Europe’s security architecture, to push for a real Zeitenwende that shatters stubborn German taboos? In his speech, Merz ruled out issuing European debt to pay for the bloc’s increasingly acute defense needs. Given the looming election, that was no surprise. But after the vote, more flexibility will be needed. Opening the door to common EU debt for defense may be the only way to bind countries across the bloc, including financially strapped ones far from the eastern front line, into an urgently needed military ramp-up. It would help the EU to bolster its fragmented defense industry and weak economy. And it would send a signal about Germany’s readiness to slaughter sacred cows in pursuit of broader strategic goals. Even Trump the grump might like that.