Trump 2.0 and China's EU policy + MERCOSUR + Trade tensions

In this issue of MERICS Europe China 360°, we cover the following topics:

• Trump 2.0: How will China adjust its Europe policy?
• The EU is losing out to China in trade relevance in MERCOSUR
• EU-China trade tensions continue to build

Trump 2.0: How will China adjust its Europe policy?

By Francois Chimits and Grzegorz Stec

The overarching goal of China’s Europe policy has long been to drive a wedge between the EU and US to prevent a common transatlantic China agenda. But the election of the mercurial Donald Trump puts Beijing’s Europe policy to the test. 

China’s leaders are hoping for a self-inflicted transatlantic split but are equally concerned about a deal or pressure on European allies to align with intensified US efforts to contain China. Even if not fully formed or articulated, broad strokes of Trump’s agenda are clear – increase pressure on China, push allies to increase defense spending, use tariffs with the goal of reindustrializing the US and strike favorable deals that leverage America’s comparative advantage in bilateral relations. 

Just what Trump ultimately aims to achieve with his China strategy and how exactly he wants to achieve it are, however, less clear. His cabinet nominations include people with a wide range of political viewpoints – traditional neoconservatives, newcomers without political experience, and even conspiracy theorists. This personnel line-up, the experience of Trump’s previous term, and his campaign promises offer three broad scenarios, each with a distinct impact on EU-US and EU-China relations: 

Trump the transactional dealmaker. In his first term, Trump often followed the transactional strategy of leveraging uncertainty and pressure to secure deals intended to boost US exports. The 2020 Phase 1 trade deal with China exemplified this mercantilist approach. A similar deal now could harm EU commercial interests, as European exports often compete with US products. Additionally, heightened US-China trade tensions risk diverting even more of China’s overcapacity exports toward the EU.