How the EU, squeezed between the US and China, can negotiate a big win

As the European Union prepares to hold its summit with China ahead of the August 1 deadline to achieve a tariff deal with the United States, it is squeezed between two superpowers. Trump’s letter threatening the EU with 30 per cent tariffs suggests that his true negotiating stance is a minimum of 15-20 per cent general tariffs and an unwavering 25 per cent on auto tariffs. Given these harsh terms, could the summit with China strengthen the EU’s bargaining position with the US?

The EU fears an influx of Chinese goods redirected from the US market due to tariffs. Even more worrying are China’s tightening restrictions on rare earth exports – which mirror the EU’s tech restrictions and underscore Beijing’s warning that trade deals with the US must not come at its expense.

A key impediment to a better China-EU relationship is the Ukraine war. While China is not known to be providing direct military reinforcement to Moscow, its economic and industrial support is seen as essential to Russia’s ability to continue waging war on Ukraine. The EU has long wished for China to use its leverage on Russia to end the war.

But the EU must also try to see things from China’s perspective. China may hold the key to altering the war’s trajectory in Europe’s favour, yet China’s focus is on a different triangle in its rivalry with the US. Both the EU and Russia believe their security is at stake in the Ukraine war. For China, however, Russia is an indispensable strategic counterweight against the US, its primary rival.

Can the EU realistically expect China to sacrifice its security for that of Europe’s simply on principle, even though any pressure exerted by China on Moscow, even in the short term, is likely to be futile in the absence of a balanced security architecture in Europe. How is this a fair expectation when the EU has been aligning with US efforts to contain China through technological restrictions?

Given that the US is relaxing its chip export controls to China, the EU needs to ask itself whether it should maintain its tight export controls on advanced chipmaking machinery when this is hurting its economic interests?

  

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