As the US goes down the trade war route with China, it’s looking for others to join the party. There are numerous reasons to believe the entire project will go down in flames like the effort to isolate Russia.
What of its Project Ukraine partner in crime, the EU? Is it game for another ride at the imperial rodeo? On April 16 the Wall Street Journal reported some of the more unsurprising recent news: that the U.S. plans to use global tariff negotiations to isolate China. The Irish Times on the same day had the scoop that any Washington-Brussels deal over tariffs will likely involve an agreement for the bloc to fully join the US in the economic war against China, which the EU is open to, although it has some qualms about other aspects of the Trump team’s proposed terms:
They suggest that the overall US strategy is to decouple from China, and that any country who wishes to have a trade deal with the US will also have to distance itself from Beijing…
At present neither US beef nor chicken can gain entry to the EU market because of strict EU rules – something which has repeatedly been complained of by the Trump administration. But senior Irish and EU sources dismissed any chance that the EU would change its standards on, for example, hormone-treated beef and chlorine-washed chicken.
The EU is also standing firm —for now— on Washington’s demands it abandon its efforts to regulate American tech behemoths operating in Europe. There are not, however, strong objections to the demands on China.
The EU was already heading down this path anyway with its recent “de-risking” campaign. In 2023, Italy abandoned its lackluster participation in Beijing’s Belt and Road Initiative. Germany faces an internal battle over its China policy, but incoming Chancellor Friedrich Merz is among those with a more hawkish tone. Still, it’s more likely that he and his coalition will continue the untenable balance of political hostility toward Beijing while maintaining the economic relationship. That arrangement favors some of Germany’s biggest companies, which continue to make significant amounts of money in China. Meanwhile, the US, European Atlanticists, and workers will push for a tougher policy. In the end, it could be decided by market developments in China. Should Germany’s Big Three auto companies continue on the path to irrelevance in the Chinese market and be overtaken by Chinese companies elsewhere, that would drive Berlin to embrace a more confrontational policy.
At the EU level, Ursula von der Leyen and many others are fully aboard the derisking train.
EU member states added new instruments to Ursula’s toolbox during her first five-year term, such as the Foreign Subsidies Regulation, International Procurement Instrument, an Anti-Coercion Instrument, the Corporate Sustainability Due Diligence Directive, the EU Critical Raw Materials Act, and the NZIA (Net-Zero Industry Act), which aims for the EU to process 40 percent of the strategic raw materials it uses by 2030. Taken together, they mean Ursula can do serious damage to trade with China if she convinces herself —or Washington does— it’s the best course of action.
The EU is making noise about cozying up to China as a counterweight to the Trump’s hardball negotiation tactics, but we’ve seen this before, and it’s best to wait and see. The EU bigwigs are not going to Beijing until late July, and both Washington and Brussels aim to iron out a deal before then ahead of the end of Trump’s 90-day tariffs pause. That reprieve was announced on April 9, which means a deadline of July 8.
Say the EU more fully commits to this path of “de-risking” from China. What will it mean for the bloc? And what knock on effect will it have on the US, which has increasingly been the recipient of transshipped Chinese goods through the EU?
In an August paper from the Peterson Institute for International Economics Mary E. Lovely and Jing Yan lay this out in detail. Aptly titled, “While the US and China decouple, the EU and China deepen trade dependencies,” the following chart tells a big chunk of the story:
What does this mean? Here’s the Conversable Economist to decipher:
In short, these patterns seem to suggest that imports not coming from China to the US economy are, in a substantial way, ending up in the EU economy instead. This pattern suggest that if the goal of US trade policy is to reduce China’s footprint in the global economy, it is unlikely to do so.
Well, unless Washington can get Brussels to once again shoot itself in the foot. What is the EU importing from China? Gone are the days when it mostly consisted of textiles, shoes, and furniture. They are now pharmaceutical ingredients, chemicals, critical raw materials, and machinery.
Disrupting that trade would be another death blow to European industry. As a recent report for the European Commission notes:
Member States with more industry-oriented economies typically exhibit higher exposure to Chinese imports. This is the case for Member States such as the Czech Republic’s (33% of total Czech extra-EU imports originate in China), Romania, Poland, Slovenia, Slovakia and Germany, underlining the important role of China as source of inputs for EU industry.
There would likely be product shortages as China is the main source of the EU’s “strategic product dependencies.” It is the primary source of 64 such products out of a total of 204 identified by the EU.
The report for the European Commission notes:
For some specific products, the EU’s import concentration on China is at very high levels of 90% and more (e.g. certain pharmaceuticals,chemicals, raw materials). Together, the wide scope in the nature and type of dependencies (“where to start?”) and deep levels of reliance on China in specific cases (“how to diversify?”) underline the complexity of de-risking import dependencies from China.
Indeed, the EU is completely reliant on China for magnesium, which is used in aerospace, automotive, electronics, and other industries for components like aircraft parts, car frames, mobile phone housings. Problem is that over 94% of the world’s magnesium export production now comes from Chinese producers. Russia makes up a big chunk of the rest. Oops.
And before Beijing threw in the towel on its zero-Covid policy, it was leading to shortages in the EU of medicines, ranging from children’s fever reducers to eye drops and antibiotics. About 80 percent of active pharmaceutical ingredients used in Europe and about 40 percent of finished medicines sold in Europe come from China or India. The EU joining the economic war against China could see a return to those days of shortages:
[China] is a major producer of older unbranded medicines that are routinely used in hospitals. Antibiotics, for example, have become increasingly outsourced to Asia, with China dominating. The country has cornered the market for the key ingredients that go into making penicillin. China also is a key exporter in other categories such as blood pressure drugs or painkillers.
Naturally, the EU plan to fix this involved “reviving investment and boosting access to affordable drugs,” as well as requiring companies to hold bigger stocks of medicines deemed essential, but did nothing to fix the underlying problem, and that pretty well sums up the story across various industries. The problem is that neoliberal motivations planted the seeds of China’s dominance today (and good for Beijing for handling those gifts responsibly). Now Western officials say they want the jobs and industry back, and in a sense they do. China has moved too far up the value chain and is no longer under their thumb. But that does not mean industrial manufacturing that left will be making a return to Detroit and Dusseldorf, Toledo and Turin.
That’s because it is not possible to simultaneously embrace neoliberalism while pursuing an industrial policy, and that’s not the goal anyways. Instead, the very same forces that shipped Western industry East are exploiting anger over those lost jobs and living standards and directing it toward China for “stealing.” And all the big money thinks it can get supply chains up and running via “friend shoring” that excludes China and runs seamlessly from other polluted slave labor centers to their garden doors.
Why would the EU be up for another economic shootout at the US’ side?
Aside from the oft-cited reasons of its misleadership class, racial motivations, and power delusions, the US does remain the most important economic partner for the bloc — just not for essential items:
At an aggregate level, the US is still the EU’s main economic partner as of today (Figure 4).8 Only for imports of goods, China stands out as more important for the EU in relative terms than the US. In other dimensions (goods exports, services imports and exports as well as inward and outward FDI), the EU-US relation is significantly more intense. A similar picture exists from the perspective of the US, with the EU as a more important economic partner across all dimensions considered.
Prior to her humiliating 2023 trip to Beijing, von der Leyen elaborated on her “de-risking” strategy in a speech on EU-China relations at the Mercator Institute for China Studies and the European Policy Centre. Here’s a key excerpt:
The starting point for this is having a clear-eyed picture on what the risks are. That means recognising how China’s economic and security ambitions have shifted. But it also means taking a critical look at our own resilience and dependencies, in particular within our industrial and defence base. This can only be based on stress-testing our relationship to see where the greatest threats lie concerning our resilience, long-term prosperity and security. This will allow us to develop our economic de-risking strategy across four pillars. The first one is: making our own economy and industry more competitive and resilient.
About that stress-testing. It’s strange that the trans-Atlantic relationship is never put to the same test as with Moscow and Beijing.
A Risky Bluff
At first glance it would appear that like in the case of Project Ukraine the EU would be due to suffer much more than the US in a coordinated economic war against Beijing due to Europe’s heavier reliance on China.
That might not be the case however. That’s because while the US might simply be masking its reliance on Beijing. The Mercator Institute for China Studies:
EU dependencies have since 2016 further concentrated on China, while US have diversified away – likely in part a consequence of the Trump Administration’s hawkish approach to China after entering office in 2016 and the start of trade measures in 2018. The US has seen its trade dependencies on Vietnam and Mexico increase, but they, in turn, have become more dependent on imports from China. This raises the question in how an increase in indirect dependencies could undercut the benefits of any decrease in direct dependencies.
And if Washington hopes for its economic war to succeed, it needs —and is actively pursuing as the above-mentioned WSJ article shows— other countries to join it against Beijing.
That’s when potential shortages could really start to bite (depending on China’s response). Here’s another chart from the Peterson Institute for International Economics:
And again from the Conversable Economist:
Indeed, given that imports often pass through the production process in several countries on their way to a final product, it’s plausible that some Chinese exports are going to Mexico and the EU, being incorporated into other products, and then ending up as US imports.
Let’s use the example of pharmaceuticals. US imports from the EU have exploded in recent years:
The US trade deficit with the EU in pharmaceuticals (NAICS definition, US data) is $120b — also 4x the deficit in autos …
And it clearly exploded around the time of the Tax Cuts and Jobs Act (the Trump-Ryan tax reform)
2/3 pic.twitter.com/nYEJ5rqPyL
— Brad Setser (@Brad_Setser) April 15, 2025
And we now have Trump threatening the EU with tariffs — including on pharmaceuticals — in order to get Brussels to engage in economic war against Beijing. If the EU acquiesces — or if it doesn’t and Trump follows through with his threats — Americans could end up paying even more exceptional prices for drugs. Here’s why:
Data from 2021 show that approximately 95 percent of vitamin B1 and its derivatives imported into the EU came from China. Over 96 percent of the heterocyclic compounds with an unfused pyrazole ring, APIs used in many antibiotics, are also imported by the EU from China. An even higher dependency can be found for chloramphenicol and its derivatives, reaching over 98 percent. Chloramphenicol is a key substance for a wide-spectrum antibiotic used for severe infections that cannot be treated with other antibiotics.
Moreover, even when the active ingredients or the final drugs are manufactured in Western countries or in India, production often depends on imports of raw materials from China. For example, India imports about 70 percent of APIs from China, including those necessary for the production of antibiotics, paracetamol and drugs for diabetes and cardiovascular diseases. In fact, compared to India, China is able to produce APIs 20-30 percent cheaper, depending on the product, thanks to the availability of cheap raw materials. In addition to the production of the APIs, China is also a key supplier of excipients, meaning substances that improve, for example, the absorption, taste or physical properties of the drug.
Roberta Pizzocaro, president of Olon, a Milan-based company that makes around 300 different pharmaceutical ingredients that go into finished drugs, tells Politico the following:
Many pharmaceutical ingredients are now only produced in Asia and some exclusively in China, said Pizzocaro. She said that her company could last “some time” on existing stocks, but it wouldn’t be long before shortages started to bite.
Perhaps it isn’t wise for nations to be so reliant on one country for so much of the pharmaceutical supply chain? The fact the EU does not have fallback options would seem to rule out launching a trade war, but to believe common sense will carry the day would require ignoring all the self destruction the leadership class repeatedly inflicts on its own citizens.
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Interesting analysis! Seems like the EU is stuck between a rock and a hard place. Can’t fully ditch China without hurting themselves, but can’t fully ignore the US either. Tough spot to be in!https://relapsetranslator.xyz/
Thank you, Conor.
A few weeks ago, the EU’s External Action Service engaged Japan and South Korea in reaction to the tariffs and avoided China. That approach is still debated between officials, departments and member states.
With regard to German automotive, an anecdote from a dozen or so years ago: Three big trade bodies, the City, French agriculture and German automotive met now and then. It was as much if your MEPs lay off us, we’ll make sure our MEPs lay off yours. On the side of one meeting, a British engineer based in Germany and I chatted. He said that within a decade or so Chinese manufacturers would eat the German industry’s lunch as German firms were not investing in the future, unlike China across a range of industries, not just automotive, and preferred to lobby for protection. I said that I had observed at NatWest Bank in the late 1990s as clients Northern Telecom and Sony Ericsson lost engineers to Chinese start ups, household names now.
A year or so later, i noticed how some families who owned Mittelstand firms cashed out and sought a London base, so that they could enjoy the social life. The money came to London, too, or went south of the Rhine. I got the impression that some of Germany’s industrial families were becoming like their (former) British counterparts, absentees, rentiers etc. It did not bode well.
When you look at world trade you also have to look at the belligerants at play , the USA has 80% of the whole worlds military weapons and no its not for defence , most of it is sited outside the usa , it is not primarily a deterrant either it is a threat and hangs over trade talks across the world , as far as the USA is concerned if you are not with us 100% you are against us and that is played out with USA relations with the EU and UK and China Russia and the rest.
The USA have no partners they stand alone thats what MAGA is all about they will do whatever they have to do to make sure they get the best trade deal with every country even if it means tariffs , sanctions or wars.
The EU was outflanked by the USA when the USA destroyed the gas pipeline bringing gas from Russia to the EU they were also outflanked by USA when they were persuaded to go to war with Russia to supposedly help Ukraine but the USA pulled out of NATO then pulled the plug on supporting Ukraine leaving the EU looking stupid again, the EU could only fight Russia if it had the USA at its side.
Now we are seeing the EU tempted to join the USA and UK in a trade war with China which will undoubtedly lead to an actual war no doubt caused by some ficticious misdemenour by China and once again the USA will stand down leaving the rest to do it alone ….OR NOT.
Are the EU dumb enough to fall for a USA trick three times in a row ?
USA have their blueprint from WWII which worked superbly well for them , wait til all involved are virtually bankrupted by war spend then step in at the end and help one side to win then offer them finance to rebuild will europe do this again ?
As I read this article, what struck me most is inability of the current elites to understand basic processes of agriculture and manufacturing. They seem to have been brought up in a world where houses are cleaned by magic, food arrives in plastic packaging, and heaven is a place where good bourgeois go to attend God’s own TED Talks.
We already know that the EU elites are sanctioning their own economies into recession. This point — the failure of sanctions on the Russian Federation — comes up over and over again in Italy, which has strong historic ties with Russia. Conor Gallagher’s description of the insouciance of the EU elites about raw materials and basic manufactured goods from China shouldn’t surprise me — after all, these elites lionize Ursula von der Leyen (I won’t mention her family’s dubious past), the ineffably mediocre Mario Draghi, and the daft Kaja Kallas.
A translation, though: “In 2023, Italy abandoned its lackluster participation in Beijing’s Belt and Road Initiative.”
Giuseppe Conte’s government had inked a deal with China, which was short term and up for renewal. Giorgia Meloni, even though she blabbers on about La Nazione, was pressured by the US of A in particular to get out of the Belt and Road Initiative.
Not Giorgia Meloni’s finest hour. One does note, though, that in the recent confab with Trump, Meloni was vague about ending ties to China.
https://www.fanpage.it/politica/italia-fuori-dalla-via-della-seta-conte-meloni-ha-fatto-un-autogol-lo-pagheranno-famiglie-e-imprese/
The new trade “regime,” which is more than Trump wants:
https://www.fanpage.it/politica/meloni-in-cina-annuncia-un-piano-triennale-con-pechino-per-nuove-forme-di-cooperazione/
It would help if the Italian right spent less time thinking about the theology of Tolkien and the magic of being a hobbit and more time on the practicalities of the Italian economy.
But then the U S of A has a vice-president who also is mixing up Quenya with Catholicism and Tom Bombadil with Saint Francis of Assisi.
Tolkien is spinning in his grave.
Thank you and well said, DJG.
With regard to a dubious family past, the European Parliament’s Liberal leader and former Belgian PM, Guy Verhofstadt, is son of Nazi collaborator Marcel.
In addition to a hereditary russophobia, the Hof, not to be confused with Germany’s most famous singer, David “the Hoff” Hasselhoff, he’s a crook. When on the board of Belgian investment firm Sofina, he advocated measures in the European Parliament that would have resulted in his side hustle making money buying assets on the cheap from financially distressed Eurozone governments.
“what struck me most is inability of the current elites to understand basic processes of agriculture and manufacturing.”
When you look at the curricula of members all European governments, you will see that almost none of them has ever worked in industry or agriculture. We are not even talking about being engineers or having a background in some tradecraft; just having been active in the primary or secondary sectors and being aware of the operational issues there. We are ruled by “symbol manipulators”.
Yep. Though I’d be a bit more general and say they don’t understand “linkages” full stop. My holiday job in late 80s was in the family business. I had to plan schedules of quotes and/or fitting meetings with customers across 3 counties….. For only 2 sometimes 3 workers.
I learnt all sorts of transferable skills based on planning in just 2D space. Things have moved on since then but the principles (as you say) remain the same…… These people haven’t done jobs with real logistical skills.
If I were a betting man I’d bet on the EU loading the gun, aiming for the little that remains of its foot after blasting off a large part with the Russia sanctions hysteria, and pulling the trigger. The highest rungs of the political status ladder in the EU are occupied by Atlanticists whose allegiance lies more with the US than the people and economy of Europe. In the unlikely event of faint murmurings of discontent among the ranks bubbling up, the sound of Trump cracking his knuckles will snuff out any ideas of a coordinated pushback (and anyone thinking the cavalry of the EU populist right will charge over the hill to save the day by putting the bloc on an IV drip of common sense and rationality will likely be disappointed. These folks are even more in thrall to the destructive ideology of Trump 2.0).
Further afield, BMW, Audi and Mercedes-Benz recently called for government intervention here in South Africa to, as they called it, “level the playing field to make the automotive sector more competitive” (read: jack up import duties on Chinese brands) because they’re losing market share at an alarming rate. It’s not unreasonable to imagine that Chinese car brands are eating the lunch of German marques across the Brics+ nations and beyond so one can expect this dynamic to harden anti-China sentiments among the EU political elites. My money is on the EU being shepherded to the edge of the cliff by the US and being told to jump.
Thank you and well said, Thuto.
I have observed from Mauritius and the mainland how German manufacturers are losing market share, not just in automotive, but consumer appliances and industrial machinery and even chemicals.
Having worked in Germany and for a German bank, I’m struggling to see what next good for Germany. I’m not the only one as Engels & Volkers has opened a few miles down the road from me on the west coast of Mauritius. When I mentioned that to someone based in Brussels and married to a German, he explained that a fair number of Germans have moved to Mauritius and brought assets with them for tax purposes.
Thank you Colonel.
If the current trajectory continues, Germany’s slide towards irrelevance will be a case study for how (not) to blow a once seemingly unassailable lead. I think it was DW that had a featured article a while back about the increasing number of well-to-do Germans who are jumping ship as they see the writing on the wall and have lost confidence in their government’s ability (and willingness) to remedy the situation.
I still marvel at the cognitive pretzeling required to conclude that Russian pipeline gas is “dependency” while the even more expensive, complex and unreliable US compressed LNG is “freedom molecules.”
If Europe’s (mis)leadership class is capable of this contortion, I put nothing past them where sacrificing their own trading relationship with China on the altar of Atlanticism (before which they so slavishly abase themselves) is concerned.
The EU will fold. You just know that they will. Trump will say that he will reduce the 20% tariff on the EU down to “only” 10% tariffs if they cut off all trade deals with China but if they do not, he will jack up tariffs to 30% or 40%. And the EU will go along with it to finally put this whole mess to bed – or so they will think. Then maybe in a coupla months Trump will want the EU do something else – like accept dodgy American beef & chicken while getting rid of EU food standards – but if they do not agree, then up goes the tariffs. The trouble is that once you pay Danegeld, you will pay it forever and a day.
Yep. He’s already up to shenanigans with UK having to accept chlorinated chicken for a deal.
The one perhaps futile belief I cling to is that the UK did a “no GM food” thing a few decades ago. It was a variation on the Japanese model where you can price something dodgy as cheap as you want….. if culture is against it you’ll sell nothing.
I predict Starmer will cave but individual shops will start labelling proper chicken as “non chlorinated” and demand will be zero for the US types.
Mainstream supermarkets might not partake in this but I bet ALDI & LIDL do….. And they’re already eating the proverbial lunch of the big 4 traditional supermarkets here in UK.
As a carer who unfortunately has to follow a bunch of strict rules I see pricing/supplier issues across supermarkets. The big 4 are fine to sell US chicken…… But I guarantee tiny sales. The middle class (or what is left of it) is already shopping at ALDI (100 metres away from the north Nottingham major branch of Sainsbury’s). I see Sainsburys desperation. Schadenfreude galore. We don’t want USA slop. Full stop.
‘individual shops will start labelling proper chicken as “non chlorinated”’
You can’t do that! Trump would call that a “trade restriction.” He will demand that all beef and chicken sold in the UK be anonymous and without labels so nobody know where it came from or what is in it.
Right wingers in the 80s were totally against that and I don’t think Reform voters will be any different….. We will demand to know origin in order to show our “Britishness” and no matter what Farage wants, we’re gonna wanna know origins etc so that won’t fly.
Reform may be a US astroturf organisation but they know their limits. Frankenstein foods from USA will NEVER fly, particularly since our BSE scandal. Not having kids that die before age 15 in horrific way beats cheap foods. We remember.
Terry F: The one perhaps futile belief I cling to….. if culture is against it you’ll sell nothing.
Something else to bear in mind is that the City is now the biggest renminbi trading in the world offshore of China, the biggest Chinese embassy in Europe will be in London (in the old Royal Mint building) and the likes of BYD is selling all over the UK, including one-hundred electric double-decker buses to London transport.
So the signs are that Perfidious Albion will be perfidious, and make noises and put on a show for Trump, while recognizing the writing is on the wall for the US and preparing for the future. Business is business, after all.
Thank you, all.
The IMF and World Bank spring meetings begin in Washington today. The British and US finance ministers will also meet today to discuss a trade deal. Although the deal won’t be concluded by the autumn, the British government would like to grab a headline when Trump visits, likely in September.
@ Michaelmas: One hopes and prays so. We City pirates aren’t going down with the sinking ship USS Uncle Sam. There are China hawks in the British government, making common cause with the ludicrous George Smith, now known as Sir Iain Duncan Smith and married into the Buckinghamshire aristocracy. Last year, the storied Hong Kong colonial firms sent representatives to the Treasury, urging the government to tone down the rhetoric. Former Bank of England official Reeves gave them a hearing and used some of their talking points when she went to Beijing.
Yep. One of my best friends from uni days is Liverpool born and bred but of Chinese ethnicity…. Far less shy about his ethnicity now….
I’ve watched the YouTube video about the Chinese-Toyota hookup with a car that’ll wipe the floor with US/EU EVs.
Perfidious Albion is probably already preparing the car lots for this amongst other things. Bye bye USA.
I would hope so but we seem to have forgotten the opportunism that made us rich and begun to believe our retconned values!
Should the EU dump China or dump Trump? After all they are already defying him on Ukraine.
And this may be highlighted here but Ben Norton interviews Michael Hudson for another explainer on the tariffs.
https://michael-hudson.com/2025/04/will-trumps-war-games-backfire/
Well, let’s phrase the question like this – Will the EU and its member states seize the opportunity to hamstring themselves in the pursuit of a virtue signaling exercise?
Based on recent policy decisions, I believe the answer is not just yes, but hell yes.
I’ve become much calmer since I gave up hope.
Nothing matters and what if it did, eh?
Serious question here and one I know is risking me violating NC rules on “make work”. Mum’s stomach issues are more and more frequent. Pepto-Bismol would definitely help but these days is practically unavailable in pharmacies in UK.
Anyone got tips on suppliers (online etc)? I’m her carer and I’m finding less and less time to live my life and contribute here when she’s going downhill, especially since I’m battling long COVID myself. Thanks.
At this point, I tend to think that the only sustainable future for Europe is to fully embrace BRICS and completely dump the USA – including expelling all military. Possibly, a formal alliance (including military) with Russia and China might actually even be required, if the EU is to survive.
Of course, considering the traitorous fools who govern nearly the entire continent and the citizenry mostly brainwashed by mainstream European media, I expect them to finish their economic suicide by discarding China and aligning with the US, for a change.
And the people are so bloody ignorant that, when the demise and collapse will come, they will ask “Why did China and Russia decide to destroy us economically?”, the way Germans back in 1945 asked GIs “We only wanted to destroy communism, why did you backstab us and declare war on us?”, totally ignorant that their very own Nazi government declared war on the USA in a show of solidarity with Japan.
The entirety of our political class and too many citizens are so far gone and so beyond redemption that my only hope left is to be around when the Atlanticist regimes will completely collapse and be replaced by saner ones – as in, “regimes and politicians not wholly consumed by Russo- and Sinophobia, and not wholly owned by the Capital and Washington DC”.
I don’t see how, they have to buy their coffee pots from somewhere.
Regarding the Pharmaceutical trade deficit between USA and EU – Matthew Klein and Michael Pettis make a good point in their book Trade Wars are Class Wars that the deficit figures relating to non-physical goods are heavily skewed due to tax havens. It makes sense in this case that when the tax cut act was passed that the deficit was affected due to how it made it easier to bring back income at a lower rate from abroad. I’d be curious to see a breakdown of the deficit based on location to see if there was a significant increase in deficit from, say, Ireland.
From Voronoi:
U.S.-Ireland Goods Trade (2024): $17 Billion Exports, $103 Billion Imports, $87 Billion Deficit
This is 1/3 of the entire EU deficit. It doubled since 2015.
So you are spot on.
What makes sense for the EU? If that means aligning goals, national policy, and planning with practical reality, plus a basic security scheme that fosters goal achievement, then all depends upon the assessment of “reality”. The Trump tariff disruption to the existing Atlanticist security scheme, and the potential to destabilize further the Eurozone economies presents an opportunity to reassess existing commitments, and habits of thinking, as much as it does further degradation. It’s a reality check that it now faces.
Thinking clearly about what are your country’s needs, what does it have to offer, its strengths, plus an assessment of the obvious and possible impediments is not what’s been happening. Decoupling from a relatively “at hand” affordable energy supply, and active confrontation with the “at hand” neighbor substituted with costlier energy, and a decaying security architecture from great distance seems not rational. It’s infected reasoning. That distant source of economic and military support is becoming more obviously undependable. Rising militarism in the face of one’s plan failure, as a solution to failure, is just digging deeper the rut.
Another commenter Clueless Joe hit the nail on the head. China will likely court more biz with EU, since it might be understood to be not delighted by USA tactics. VW has a look ready demonstrated a clear understanding of what the future is. They’ve built a modern factory in China to make EV. Legacy carmakers will take a huge hit. Or, they can adapt as is VW, and survive…with Chinese help.
The obvious route is not militarism, not fear and war mongering as your national plan, but realism. BRICS offers advantages including access to the CRM supply chain, cooperative trading, infrastructure development and banking alternatives. If it chose to court China instead of fight China, it has a future. Otherwise, China is the future and it can patiently wait for the current iteration of European leadership to collapse. Meanwhile it dominates every major critical supply chain. There will be no recovering that.
Although the PIIE think tank charts are interesting, they are also not terribly revealing of the degree of domination up and down the supply chains for almost every major sector of business, and development. Conor Gallagher could do well to study the business press that comments endlessly about specific situations that give the clear picture about what’s afoot globally, and just how utterly dominant China is and will be. Or, for a quick crash course lesson, watch a few reports from Inside China Business on YouTube. These are the single best reports there are. Sean Foo possibly a second. ICB makes it pretty darn clear.
The Belt and Road Initiative was a missed chance for Italy. It may be rethinking it, as should the EU as a whole.
Does EU leadership have a realistic assessment of what’s coming? Does it offer the world anything more than ramped up militarism? It’s doubtful, but rapprochement with Russia, would certainly be necessary either way with BRICS as an EU lifeline, or even without. With BRICS is an obvious plus, and without it, the militarism cannot save the EU. The ending is not a happy thing to ponder.
Interesting article! Seems like the EU is in a tough spot, trying to balance economic interests with political pressures. Let’s see if they actually go all-in on this “de-risking” thing.