Trump’s Tariffs Force Europe to Rethink Ties With China

0:00Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

0:42When you're running a business, the best days are the ones where priorities stay on track. For midsize and large companies, that isn't always easy. Risk can touch multiple parts of an organization at the same time, often in ways that aren't immediately obvious. It might involve property, liability, or cyber. It could stem from regulatory requirements or challenges tied to a specific industry or the scale of an operation. At that level, managing risk becomes an ongoing discipline, not a one-time decision. At The Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive.

1:16That means working with companies to identify where they're exposed, decide what matters most, and put practical standards in place so risk is managed as part of day-to-day operations. And when losses do happen, the Hartford can pair that risk-control work with insurance coverage grounded in underwriting, risk engineering, and claims experience developed over time. Learn more at thehartford.com slash risk mitigation. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups.

1:49There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart. Get wise. T's and C's apply.

2:13Bloomberg Audio Studios. Podcasts. Radio. News. This week, top European Union leaders are traveling to Beijing for a high-level summit, where they'll address everything from climate change to trade. The meeting coincides with the 50th anniversary of diplomatic ties between the EU and China, and could signal a turning point in what's often been a turbulent relationship. The U.S., UK and EU sanctioned China for human rights abuses in Xinjiang. Beijing retaliates immediately, putting its relations with Western nations on course for a further downward spiral. China is prepared to lift some sanctions on EU officials in a bid to work towards a detente.

2:58The EU and China often find themselves at odds on a number of geopolitical and economic issues. But lately, they can agree on one thing, the need to counter President Donald Trump's tariffs. EU nations, by and large, do want to de-risk from the U.S. market because they see it as unpredictable. Alan Crawford is a senior editor at Bloomberg. He's been covering international relations from Berlin for nearly two decades. And he says by distancing itself from the US, the EU is putting itself in a position to recalibrate its relationship with China, its second largest trading partner. There are different voices in Europe advocating different paths as regards relations with China.

3:45And there is an official skepticism, if you like. The official line from the European Commission chief, Ursula von der Leyen, is to de-risk as regards China. But that is not quite reflected in some of the individual EU member states, the governments and the government leaders. Allen says you don't have to look too hard to see signs that European countries are warming up to China. The presidents of Spain and France have publicly endorsed deeper ties. And companies like Chinese EV manufacturer BYD have expanded operations into the region. BYD, its main European plant, is under construction at the moment in Hungary.

4:30Slovakia is also attracting EV and battery technology. These developments haven't gone unnoticed by the U.S. Earlier this year, Treasury Secretary Scott Besant warned the continent against pivoting to China. minister in Spain made some comments this morning. Oh, well, maybe we should align ourselves more with China. That would be cutting your own throat. Allen says with geopolitical tensions rising and Trump's tariffs taking their toll, the EU is at a crossroads. Does it pursue strategic autonomy, as it's called, or does it try and align more closely with China? Or indeed, does it just look past Trump's tariffs and overall aggression and continue its transatlantic ties?

5:19This is The Big Tick Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, how Trump's trade war is changing the EU's approach to Chinese investment.

5:45Relations between the EU and China have fluctuated over the past half century. From 1975 to 2010, trade between the two grew steadily as China initiated reforms, signed economic cooperation agreements, and joined the World Trade Organization. In 2009, Chinese investments in Europe rose to$3 billion. By 2016, it had reached$40 billion. Here's Bloomberg senior editor Alan Crawford. There were some really big, notable Chinese investments. The figures vary somewhat, but it reached a peak around 2016, and it was tens of billions of dollars. One example back then was Ken China's takeover of the Swiss agrochemical company Syngenta, And that was valued at$43 billion.

6:36So it gives you an indication of the kind of volumes we're talking about. And broadly, Alan, where were these investments going in Europe? Back then in 2015, 16, it was really in the big economies of France, Germany, Italy and the UK. China was investing in a real mixed bag of companies and assets. They were buying things like football clubs. They bought Inter Milan, a famous club in Italy. They bought travel companies. But then there started to be more investments in infrastructure. So we saw in rail lines. Specifically, we saw ports. The famous one is Costco bought into Piraeus Port, which is the harbour for Athens and key to all of the Mediterranean shipping.

7:24Subsequently, China bought into other ports in the Mediterranean and in the Adriatic. So it looked very suspiciously as if Chinese companies, some of them with state backing, were deliberately buying up infrastructure. So when Chinese companies were picking up things like football clubs and travel companies, no problem. But when they started investing infrastructure, that really raised the alarm bells for a lot of European governments. Yes, it took a while for the concerns to be shared. Germany and France had concerns before Italy did. And this was communicated, interestingly, by a business group in Germany.

8:07They were among the first to issue a landmark report, which was critical of some of the investments and urging the government to be very cautious. And this was subsequently taken up at EU level. And it became a new law in turn that granted rights for investment screening. While China's infrastructure investments raised flags, there have been points of contention politically between the EU and China too. The pandemic was really an inflection point. There was a lot of criticism in Europe of China's mask diplomacy. If you remember that China produces a lot of the medical equipment, which the world suddenly found themselves without.

8:51And China was criticized for favoring its allies in terms of these supplies. Subsequently, there were criticisms directed by European politicians at Beijing over the treatment of minorities in Xinjiang. And that actually culminated in the trading of sanctions between EU lawmakers and China. What was the impact of this increased scrutiny? How did that affect Chinese investments in Europe after that? It's been very clear that if you just look at a graph, it's on a clear downward trajectory. There was a recent report by Merix that studies China based in Berlin, where I am here, and it found that there were seven consecutive years of declines in terms of overall Chinese investment in Europe.

9:38But 2024, Chinese investments ticked up for the first time. It's important to make the point that this is still just a very small uptick, and it's still at a low level compared to back in the heyday, the golden era. But given the global environment we're talking about, it still seems significant to point out this change after seven consecutive years of decline. According to the report, last year's rebound of Chinese investments into Europe totaled 10 billion euros, or about 12 billion dollars. One of the interesting developments of recent years is that the investment profile has changed. It's starting to shift from taking stakes in companies or in particular projects or infrastructure.

10:25Then it's shifting now to more greenfield investments, which means they're building new factories. And it's reflective of the fact that China has moved up the value chain. that now China has its own world-leading technologies, notably, of course, in electric vehicles and EV technology, clean tech. And European governments, by and large, are very keen to have those. And then, of course, there's Trump's tariffs. After the break, the new China-EU approach.

11:28www.chatchypt.org that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Let's talk about healthcare for a second. It doesn't always work the way people expect it to. If you've ever waited on a prescription refill or had a hard time getting the care you needed, you know the feeling. The system should just work better for everyone. That's exactly what the people at Optum are trying to do every day. They're a health care company linking patient care and pharmacy services and using data and technology to drive the whole system so care is connected, not complicated, for patients and providers.

12:14Things like making it easier to get care that looks at the whole person, from primary care doctors to mental health support and even in-home care, and then using technology to make sure they all work together. technology designed to help doctors spend less time on busy work and more time with their patients. And those prescriptions? Optum is working to bring costs down, save patients money, and make it easier to get refills. Little by little, Optum is helping make healthcare work as one for everyone. Head to business.optum.com to see how. Wise is the smart way to manage the currencies you need around the globe.

12:51If you've ever sent money internationally using a traditional bank, there's a good chance you've paid more than you realized. Hidden fees, exchange rate markups, and extra charges can quietly add up before your money even arrives. There's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google, helping you avoid the unwelcome surprises that often come with international transfers. Whether you're sending money to family overseas, spending while on your holiday abroad, or paying bills across borders, Wise makes moving money simple, transparent, and straightforward. Wise offers 24-7 customer service and runs over 7 million daily checks to spot and stop fraud.

13:29And most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. Join millions, saving billions. Be smart. Get Wise. Visit wise.com or download the Wise app today. T's and C's apply.

13:55Last year was an important year for Chinese investments in Europe. It was the first time that Chinese companies upped their spending there, after seven years of declines. Alan Crawford and a team of Bloomberg reporters dug into these figures and found there was a shift in the nature of these investments, as well as where the money was going. Broadly speaking, a very notable development has been this shift from Western Europe to Central and Eastern Europe. BYD, its main European plant, is under construction at the moment in Hungary. Slovakia is also attracting EV and battery technology. I think what's interesting about these two countries is that they're both run by leaders who are very close to China politically.

14:42They're both somewhat problematic in terms of the European mainstream. And by that, I mean that they have ties to Moscow and they are proud of their close relationships with Xi Jinping. And it sounds like the governments are also responding differently this time around, right? Like some of these investments are actually being very much welcomed. That's exactly true. These are actually plants that bring jobs and technology and arguably prestige to the nations that have these. It's essentially a race for the technology at the moment, which is a change, of course. Rather than China trying to get a hold of Western technology, this is European countries that are very keen to have Chinese advanced EV plants in their countries.

15:30But it's not just prestige and shared political interests that are pushing European nations closer to China. Trump's tariffs have played a significant role. The U.S. is already threatening the EU with 30 % tariffs. It's not exactly designed to win friends and influence in Europe. It can only turn Europe away from the U.S. There are different voices in Europe advocating different paths as regards relations with China. There is an official scepticism, if you like. The official line from the European Commission chief, Ursula von der Leyen, is to de-risk as regards China. Europe is fully committed to result-oriented engagement with China.

16:18And this commission is leading the way when it comes to de-risking, not decoupling. But that is not quite reflected in some of the individual EU member states. We recently had the Spanish Prime Minister, Pedro Sanchez. He was in Beijing meeting with Xi Jinping, and he was talking very much about opening up more to China. And his emphasis was on much more in terms of investment, much closer relations. but other leaders are somewhat more wary and are hedging their relations. Notably, the German government, which is the biggest economy in Europe, it's the number three economy worldwide. It tends to set the tone in Europe and the EU as a whole.

17:02What are some of the concerns, the reservations that specific countries have about the warming ties to China and the investments? The single biggest issue that is shared by the vast majority of EU nations, the governments and the EU itself and Brussels is China's close relationship with Russia. European governments, leaders individually, the German Chancellor, the French President and EU officials have been making the case to Xi Jinping to exert influence on Vladimir Putin to stop the war in Ukraine. The argument is that China could exert pressure on North Korea not to supply Russia with artillery and with troops, actually.

17:46But that doesn't seem to have had any influence either, which to take us back to the upcoming EU-China summit, that will undoubtedly be a sticking point in any development towards closer relations. I'm wondering then, where does this leave us now? Are we seeing a pivot to China from the EU side? Is there a strong sense that EU countries want to de-risk or de-leverage from the U.S. market? These are two separate but connected issues. Yes, EU nations by and large do want to de-risk from the U.S. market because they see it as unpredictable, at the very least. The transatlantic relationship is arguably in more trouble than it has been for decades.

18:34At the same time, I don't think that yet translates to a pivot towards China for the reasons of China's support for Russia during the Ukraine war. But also there is a skepticism and inherent weariness which has developed over the past decade, which means that by and large, as a whole, Europe isn't quite ready to fall into bed with China, if you like. I think that there's a recognition that Europe needs to find its own path between the two giants of Beijing and Washington. Now, U.S. Treasury Secretary Scott Bessent had warned European governments against aligning more with China. At the same time, the U.S.

19:17seems to be cozying up to China itself. Of course, things change on a day-to-day basis. A few weeks ago, we were talking about threats of 145 % tariffs on China. Now we've seen that the US is allowing NVIDIA to sell some of its AI chips to China, which is a complete reversal of the Biden administration's policy and indeed the Trump administration's policy of a few weeks ago. And we're talking about a potential Xi-Trump summit. Trump seems to be willing to do some kind of broader deal with China. And by its very nature, I think that would carve out Europe and leave Europe further adrift, which kind of gives more ammunition to the calls in Europe for more autonomy here on the continent.

20:06Back to the EU-China summit later this week, what outcomes do we expect from the talks? What could be the biggest signals that things are warming up between the EU and China? Or are there things to watch in terms of flags, red flags possibly? I think it will be very easy for the both sides to agree on the need for free trade and to call out protectionism. They are highly unlikely to name the US or Donald Trump, but they will presumably, I would imagine, put out a robust statement in terms of global values, multilateralism against unilateralism, going it alone. So reading between the lines, it's clear that they don't like the approach of the Trump administration slapping tariffs and unilaterally pulling out of the Paris Climate Accord and so on.

21:01I think that they will agree on climate issues. One of the biggest potential sticking point is over this China support for Russia. China is still withholding rare earth exports to Europe. I guess the issue really for me is whether these blow up and come out into the open or whether they manage to keep them behind closed doors and maintain a unified stance on those points they can agree on.

21:39This is The Big Tech Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you like the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

22:28Thank you. that looks at the whole person, how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com. As industries evolve faster than ever, companies need an environment that accelerates strategic growth and Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent and a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level.

23:06Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. Before you sign off, you tuned in for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. ChatGPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in ChatGPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using ChatGPT for work. Download the ChatGPT desktop app or contact sales to learn more.