GOOD MORNING FROM LONDON
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EU/CHINA RELATIONS STRENGTHEN AT EXPENSE OF USA
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FIRST.
GIDEON RICHMAN OF THE FT WRITES;-
“Our strategy on tariffs will be to shoot first and ask questions later.” That was what one of Donald Trump’s key economic policymakers told me late last year. That kind of macho swagger is currently fashionable in Washington. But the US president’s shoot-from-the-hip tactics are profoundly dangerous — for America itself, as well as the countries that he has targeted with tariffs.
The potential economic risks for the US — higher inflation and industrial disruption — are well known. The strategic consequences for America are less immediately obvious — but could be just as serious and even longer lasting. Trump’s tariffs threaten to destroy the unity of the western alliance. He is sowing the seeds of an alternative grouping formed by the many countries that feel newly threatened by America. Co-operation will be informal at first, but will harden the longer the tariff wars go on.
The collapse of western unity would be a dream come true for Russia and China. Trump himself may not care; he has often expressed his admiration for Vladimir Putin and Xi Jinping. But Marco Rubio and Mike Waltz — the men Trump has appointed as secretary of state and national security adviser — both claim to believe that containing Chinese power is the central strategic challenge facing the US. If that is the case, it is profoundly stupid for Trump to impose tariffs on China, Canada and Mexico (although the Mexicans may have negotiated a one-month stay of execution).
In so doing, he risks creating a convergence of interest between these three countries — as well as the EU, which has been told it is next in line for the tariff treatment.
When the Biden administration took office in 2021, the EU was poised to push through a new investment agreement with China. But that was abandoned after pressure from Washington and blunders by Beijing. By the end of the Biden period, the US and the European Commission were working closely together on efforts to “de-risk” trade with China and to restrict exports of key technology. The Biden administration’s key insight was that, if the US is engaged in a global contest with China, it is much more likely to prevail if it can persuade the other advanced democracies to work alongside it.
Trump, by contrast, has decided to go after America’s allies much more vigorously than its adversaries. The likely consequence is that he will drive those allies back towards China. European policymakers already know that the ambitious targets they have set for the green transition will be impossible without Chinese electric vehicles, batteries and solar panels. The threat of losing American markets will make the Chinese market look even more necessary.
When I suggested to a senior European policymaker last week that the EU might now consider warming up to China once again, she responded: “Believe me, that conversation is already taking place.” Some influential Europeans are even asking whether the US or China is now the more direct threat. This would have been an absurd question just two months ago. But it is Trump — not Xi — who is talking about ending the independence of Canada, a Nato member state. And it is the Trump administration and Elon Musk — not the Chinese government — that is promoting the far-right in Europe.
Chinese mercantilism and Beijing’s support for Russia’s war on Ukraine remain major stumbling blocks to any rapprochement between China and Brussels. But if the Trump administration abandons Ukraine — and Beijing takes a tougher line with Russia — the way would be open for a European tilt towards China. China will also sense new opportunities in Latin America as the continent bristles at America’s threats to Panama and Mexico.
Canada and Mexico are painfully aware that the odds are stacked against them in a trade war with the US. But they are compelled to retaliate. No national leader can afford to seem weak in the face of American bullying. And hitting back against Trump is probably the right strategic move. As one European foreign minister put it to me recently: “If Trump punches you in the face and you don’t punch back, he’ll just hit you again.”
Countries such as Britain and Japan that have not yet been singled out for tariffs might breathe a sigh of relief. But they are kidding themselves if they think keeping a low profile will buy them immunity. If Trump decides that his first tariff war has worked, he will certainly look for new targets.
Corporate America also needs to wake up and stop the sycophantic prating about the return of “animal spirits” to the US economy. What Trump is essentially offering America is economic autarky and the destruction of the western alliance. That would be an economic and strategic disaster for American business — and for the US as a whole.”
SECOND.
EU PRESIDENT TALKS ON EU/CHINA
SOUTH CHINA MORNING POST
“As the European Union braces for rocky ties with its ally the United States, its top official has left the door open for a thaw in relations with China.
For the second time in a fortnight, European Commission President Ursula von der Leyen – seen as the continent’s most prominent China hawk – said there was space to deepen trade ties and even “find agreements” with Beijing, in “an era of hyper-competitive and hyper-transactional geopolitics”.
“We will keep de-risking our economic relationship – as we have been doing in recent years. But there is also room to engage constructively with China – and find solutions in our mutual interest,” von der Leyen said in a speech before the EU’s diplomatic corps in Brussels.
“I think we can find agreements that could even expand our trade and investment ties. It is a fine line that we need to walk. But it can lead us to a fairer and more balanced relationship with one of the world’s economic giants. And that can make sense for Europe,” she continued.
The speech represents a significant softening in tone from the European Commission, forced by what von der Leyen described as “this hot-headed world” following the return of US President Donald Trump to the White House.
For the past four years, she has steered the EU on a more assertive direction on China, vowing to tackle Beijing’s trade imbalances and penalise it for providing support for Russia’s invasion of Ukraine.
But with the transatlantic alliance under huge pressure and Trump threatening to impose stinging tariffs on European imports, von der Leyen’s rhetoric has become more pragmatic.
The new tone was first heard at the World Economic Forum in Davos last month, when von der Leyen described “an opportunity to engage and deepen our relationship with China, and where possible, even to expand our trade and investment ties”.
#Tuesday’s speech developed on the theme, raising the prospect of “agreements” with Beijing, without specifying what they might be.
“We might have to engage in tough negotiations, even with long-time partners. And we might also have to work with countries that are not like-minded but do share some of our interests,” von der Leyen said.
She described “a world in which there is now a concerted attempt to build spheres of influence – and even grab land – much like in the 19th century or at the height of the Cold War”, in what could be read as a rebuke of Trump, who has threatened repeatedly to annex the Danish territory of Greenland.
GRAHAM PERRY COMMENTS;-
An under-appreciated feature of the work of the Central Committee of the Communist Party of China – including the Politburo – is the volume of study sessions on the subject of the theory and practice of political development and the ever-present starting point for such sessions is the article by Mao Tsetung ‘On Contradiction.’
Mao focuses on the permanent feature of the relationship between conciliation and conflict and the starting point is that things are always changing. Stability is temporary and instability is permanent. Whenever things appear stable, be alert to the build up of forces that will create instability and, in turn, when a period of instability dominates look out for the forces that will bring a return to stability.
It is useful to bear the dialectic in mind when looking at what was formerly called the East-West structure of world power. It is undergoing change. It is not caused by Trump but his response to the change is what is now driving adjustments to the power balance in world affairs generally.
In a word there is flux. Things are not stable or in balance. Power relationships are under review because the tectonic plates are shifting – a reflection of a change that has been underway for a number of years. China is not the cause but its emergence on the world scene is undermining the old structures as new relationships come into play.
Take Greenland for example. Underlying factors include climate change which is triggering possible infrastructure development. The US hard line policy on semiconductors – designed to restrain China’s economic advance – is provoking China to respond by reducing exports of rare earths especially gallium. This has led the US to heighten its interest in the potential to focus on the extraction of Greenland’s rare earths and raise the possibility of a second “gold rush” and a Trump demand for Denmark to allow the US to take over the world’s largest island. This in turn has alerted the EU to pressure from the White House to use the EU trade deficits to ratchet up US demands for a change in the ownership of Greenland.
Tensions between the US and the EU are increasing and Trump is likely to stir matters further and angry exchanges will be more visible in the months ahead. Relations between Washington and Brussels are set to sour.
Back to Mao and On Contradiction and his main thesis that co-operation and competition – that stability and instability – that warmth and embrace on the one hand and coldness and rejection on the other are all part and parcel of development. Good things happen but bad things happen as well. Be prepared. Be alert. Eyes wide open. A fissure in the relationship between the US and the EU provides an opportunity for China to strengthen its relationship with Brussels.
And bad things are happening. The messianic and, apparently, irresistible Trump is going after Denmark because Trump fears Russian/China penetration of the Arctic area and the loss of the opportunity to exploit Greenland’s undoubted mineral resources. But this is just the beginning because Trump will soon focus his fire on France and Germany – the UK may escape – and demand that their defence contributions to NATO are raised to 5% of GDP.
One door closes and another door opens. China welcomes the opportunity to improve relations with the EU – not just because of solar panels and Electric Vehicles but because a strengthening relationship with the EU offers the possibility of much improved trade relations with the member countries of the substantial European Union. Sometimes the changes under the earth’s surface make a big impact above the earth’s surface.
GRAHAM PERRY
