WEBVTT - Trump’s Tariffs Force Europe to Rethink Ties With China 0:00:02.720 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:08.320 --> 0:00:11.920 This week, top European Union leaders are traveling to Beijing 0:00:12.080 --> 0:00:14.960 for a high level summit where they'll address everything from 0:00:15.000 --> 0:00:19.240 climate change to trade. The meeting coincides with the fiftieth 0:00:19.239 --> 0:00:23.360 anniversary of diplomatic ties between the EU and China and 0:00:23.440 --> 0:00:26.720 could signal a turning point in what's often been a 0:00:26.800 --> 0:00:28.240 turbulent relationship. 0:00:28.400 --> 0:00:31.960 The US, UK and EU sanctioned China for human rights 0:00:32.000 --> 0:00:37.080 abuses in Shinjung. Beijing retaliates, immediately, putting its relations with 0:00:37.200 --> 0:00:40.559 Western nations on course for a further so China is 0:00:40.680 --> 0:00:45.199 prepared to live some sanctions on EU officials in a 0:00:45.280 --> 0:00:47.800 bid to work towards a dayton. 0:00:48.080 --> 0:00:51.280 The EU and China often find themselves at odds on 0:00:51.360 --> 0:00:55.279 a number of geopolitical and economic issues, but lately they 0:00:55.280 --> 0:00:58.960 can agree on one thing, the need to counter President 0:00:59.000 --> 0:01:00.160 Donald Trump's terra. 0:01:02.520 --> 0:01:05.399 EU nations buy and large do want to de risk 0:01:05.440 --> 0:01:09.320 from the US market because they see it as unpredictable. 0:01:09.840 --> 0:01:13.360 Alan Crawford is a senior editor at Bloomberg. He's been 0:01:13.360 --> 0:01:17.440 covering international relations from Berlin for nearly two decades, and 0:01:17.480 --> 0:01:20.680 he says by distancing itself from the US. The EU 0:01:20.800 --> 0:01:24.320 is putting itself in a position to recalibrate its relationship 0:01:24.360 --> 0:01:27.200 with China, its second largest trading partner. 0:01:27.880 --> 0:01:32.440 There are different voices in Europe advocating different paths as 0:01:32.480 --> 0:01:38.919 regards relations with China, and there is an official skepticism, 0:01:39.040 --> 0:01:43.520 if you like. The official line from the European Commission 0:01:43.560 --> 0:01:48.160 Chief or Shulaf underline is to d risk as regards China, 0:01:48.200 --> 0:01:50.840 but that is not quite reflected in some of the 0:01:50.880 --> 0:01:55.040 individual EU member states, the governments and the government leaders. 0:01:55.760 --> 0:01:58.240 Alan says, you don't have to look too hard to 0:01:58.280 --> 0:02:01.520 see signs that European country are warming up to China. 0:02:02.040 --> 0:02:05.960 The presidents of Spain and France have publicly endorsed deeper ties, 0:02:06.440 --> 0:02:11.720 and companies like Chinese EV manufacturer BYD have expanded operations 0:02:11.760 --> 0:02:12.520 into the region. 0:02:13.280 --> 0:02:18.760 Byd its main European plant is under construction at the 0:02:18.760 --> 0:02:25.400 moment in Hungary. Slovakia is also attracting EV and battery technology. 0:02:25.600 --> 0:02:30.440 These developments haven't gone unnoticed by the US. Earlier this year, 0:02:30.600 --> 0:02:35.000 Treasury Secretary Scott Bessant warned the continent against pivoting to China. 0:02:35.040 --> 0:02:38.600 A minister, the Economic Minister in Spain, made some comments 0:02:38.600 --> 0:02:42.560 this morning, Oh well, maybe we should align ourselves more 0:02:42.639 --> 0:02:43.120 with China. 0:02:43.880 --> 0:02:46.760 That would be cutting your own throat, Alan says. With 0:02:46.919 --> 0:02:51.520 geopolitical tensions rising and Trump's tariffs taking their toll, the 0:02:51.600 --> 0:02:53.560 EU is at a crossroads. 0:02:53.960 --> 0:02:57.839 Does it pursue strategic autonomy, as it's called, or does 0:02:57.880 --> 0:03:01.120 it try and align more closely with China, or indeed, 0:03:01.160 --> 0:03:05.200 does it just look past Trump's tariffs and overall aggression 0:03:05.400 --> 0:03:07.360 and continue its transatlantic ties. 0:03:09.040 --> 0:03:12.560 This is the Big Take Asia from Bloomberg News. I'm Wanha. 0:03:13.200 --> 0:03:15.639 Every week we take you inside some of the world's 0:03:15.680 --> 0:03:19.760 biggest and most powerful economies and the markets, tycoons, and 0:03:19.919 --> 0:03:24.320 businesses that drive this ever shifting region. Today on the show, 0:03:24.520 --> 0:03:28.320 how Trump's trade war is changing the EU's approach to 0:03:28.560 --> 0:03:38.720 Chinese investment. Relations between the EU and China have fluctuated 0:03:38.760 --> 0:03:41.960 over the past half century. From nineteen seventy five to 0:03:42.000 --> 0:03:45.840 twenty ten, trade between the two grew steadily as China 0:03:45.920 --> 0:03:50.600 initiated reforms, signed economic cooperation agreements, and joined the World 0:03:50.640 --> 0:03:54.640 Trade Organization. In two thousand and nine, Chinese investments in 0:03:54.720 --> 0:03:58.880 Europe rose to three billion dollars. By twenty sixteen, it 0:03:58.880 --> 0:04:03.760 had reached forty billion dollars. Here's Bloomberg Senior editor Alan Crawford. 0:04:04.560 --> 0:04:09.240 There were some really big, notable Chinese investments. The figures 0:04:09.360 --> 0:04:13.119 vary somewhat, but they reached a peak around twenty sixteen, 0:04:13.560 --> 0:04:16.839 and it was tens of billions of dollars. One example 0:04:16.960 --> 0:04:22.000 back then was ken China's takeover of the Swiss agrochemical 0:04:22.160 --> 0:04:26.159 company Syngenta, and that was valued at forty three billion dollars, 0:04:26.240 --> 0:04:28.240 So it gives you an indication of the kind of 0:04:28.320 --> 0:04:29.600 volumes we're talking about. 0:04:30.080 --> 0:04:32.800 And Bradley Allen, where were these investments going in Europe 0:04:34.120 --> 0:04:34.640 back then? 0:04:34.880 --> 0:04:38.440 In twenty fifteen sixteen, It was really in the big 0:04:38.440 --> 0:04:43.880 economies of France, Germany, Italy and the UK. China was 0:04:43.920 --> 0:04:48.240 investing in a real mixed bag of companies and assets. 0:04:48.760 --> 0:04:51.960 They were buying things like football clubs. They bought into Milan, 0:04:52.200 --> 0:04:55.839 a famous club in Italy. They bought travel companies. But 0:04:56.040 --> 0:05:00.160 then there started to be more investments in infrastructure, so 0:05:00.480 --> 0:05:04.799 in rail lines specifically, we saw ports. The famous one 0:05:04.960 --> 0:05:08.880 is Costco bought into Perea's port, which is the harbor 0:05:08.960 --> 0:05:14.680 for Athens and key to all of the Mediterranean shipping. Subsequently, 0:05:14.880 --> 0:05:18.800 China brought into other ports in the Mediterranean and in 0:05:18.839 --> 0:05:23.960 the Adriatic, So it looked very suspiciously as if Chinese companies, 0:05:24.200 --> 0:05:29.040 some of them were state backing, were deliberately buying up infrastructure. 0:05:29.320 --> 0:05:31.880 So when Chinese companies were picking up things like football 0:05:31.960 --> 0:05:35.800 clubs and travel companies, no problem. But when they started 0:05:35.800 --> 0:05:38.920 investing infrastructure, that really raised the alarm bells for a 0:05:38.960 --> 0:05:40.640 lot of European governments. 0:05:41.160 --> 0:05:45.400 Yes, it took up while for the concerns to be shared. 0:05:45.880 --> 0:05:51.640 Germany and France had concerns before Italy did, and this 0:05:51.800 --> 0:05:57.120 was communicated interestingly by a business group in Germany. They 0:05:57.200 --> 0:06:01.440 were among the first to issue a landmark which was 0:06:01.720 --> 0:06:06.040 critical of some of the investments and urging the government 0:06:06.120 --> 0:06:09.760 to be very cautious. And this was subsequently taken up 0:06:09.800 --> 0:06:13.720 at EU level and it became a new law in 0:06:13.800 --> 0:06:17.720 term that granted rights for investment screening. 0:06:18.520 --> 0:06:22.599 While China's infrastructure investments raised flags, there have been points 0:06:22.640 --> 0:06:25.960 of contention politically between the EU and China too. 0:06:26.760 --> 0:06:30.560 The pandemic was really an inflection point. There was a 0:06:30.560 --> 0:06:34.760 lot of criticism in Europe of China's mask diplomacy. If 0:06:34.760 --> 0:06:37.440 you remember that China produces a lot of the medical 0:06:37.440 --> 0:06:41.720 equipment which the world suddenly found themselves without, and China 0:06:41.880 --> 0:06:48.640 was criticized for favoring its allies in terms of these supplies. Subsequently, 0:06:48.880 --> 0:06:54.400 there were criticisms directed by European politicians at Beijing over 0:06:54.600 --> 0:06:59.480 the treatment of minorities in Shinjang, and that actually culminated 0:06:59.520 --> 0:07:03.640 in trading of sanctions between EU lawmakers and China. 0:07:04.400 --> 0:07:07.000 What was the impact of this increased scrutiny, How did 0:07:07.000 --> 0:07:08.520 that affect Chinese investments in Europe? 0:07:08.520 --> 0:07:11.240 After that, it's been very clear that if you just 0:07:11.240 --> 0:07:14.920 look at a graph, is on a clear downward trajectory. 0:07:15.280 --> 0:07:18.720 There was a recent report by Merricks that studies China 0:07:18.880 --> 0:07:21.920 based in Berlin, where I am here, and it found 0:07:21.960 --> 0:07:25.320 that there were seven consecutive years of declines in terms 0:07:25.400 --> 0:07:29.200 of overall Chinese investment in Europe, but twenty twenty four 0:07:29.800 --> 0:07:34.280 Chinese investments ticked up for the first time. It's important 0:07:34.320 --> 0:07:36.360 to make the point that this is still just a 0:07:36.480 --> 0:07:39.640 very small uptick, and it's still at a low level 0:07:39.720 --> 0:07:42.600 compared to back in the heyday, the Golden era. But 0:07:42.800 --> 0:07:45.680 given the global environment we're talking about, it still seems 0:07:45.720 --> 0:07:50.320 significant to point out this change after seven consecutive years 0:07:50.320 --> 0:07:50.960 of decline. 0:07:51.120 --> 0:07:54.800 According to the report, last year's rebound of Chinese investments 0:07:54.800 --> 0:08:00.320 into Europe total ten billion euros or about twelve billion dollars. 0:08:00.360 --> 0:08:03.760 One of the interesting developments of recent years is that 0:08:03.840 --> 0:08:10.120 the investment profile has changed. It's starting to shift from 0:08:10.440 --> 0:08:14.680 taking stakes in companies or in particular projects or infrastructure. 0:08:15.240 --> 0:08:19.040 Then it's shifting now to more green field investments, which 0:08:19.080 --> 0:08:24.520 means they're building new factories. And it's reflective of the 0:08:24.520 --> 0:08:27.440 fact that China has moved up the value chain that 0:08:27.640 --> 0:08:33.079 now China has its own world leading technologies, notably of course, 0:08:33.120 --> 0:08:38.600 in electric vehicles and EV technology, clean tech, and European 0:08:38.640 --> 0:08:41.880 governments buy and large are very keen to have those. 0:08:44.080 --> 0:08:47.320 And then of course there's Trump's tariffs after the break 0:08:47.520 --> 0:09:03.360 the new China EU approach. Last year was an important 0:09:03.400 --> 0:09:06.199 year for Chinese investments in Europe. It was the first 0:09:06.200 --> 0:09:09.720 time that Chinese companies up their spending there after seven 0:09:09.800 --> 0:09:13.160 years of declines. Alan Crawford and a team of Bloomberg 0:09:13.200 --> 0:09:15.920 reporters dug into these figures and found there was a 0:09:15.960 --> 0:09:18.960 shift in the nature of these investments as well as 0:09:19.120 --> 0:09:20.559 where the money was going. 0:09:21.360 --> 0:09:26.000 Broadly speaking, a very notable development has been this shift 0:09:26.600 --> 0:09:31.160 from Western Europe to Central and Eastern Europe byd Its 0:09:31.320 --> 0:09:36.040 main European plant is under construction at the moment in Hungary. 0:09:36.440 --> 0:09:41.840 Slovakia is also attracting EV and battery technology. I think 0:09:41.880 --> 0:09:44.760 what's interesting about these two countries is that they're both 0:09:44.880 --> 0:09:48.120 run by leaders who are very close to China politically. 0:09:48.920 --> 0:09:53.600 They're both somewhat problematic in terms of the European mainstream, 0:09:54.040 --> 0:09:56.840 and by that I mean that they have ties to 0:09:57.000 --> 0:10:01.360 Moscow and they are proud of their those relationships with 0:10:01.600 --> 0:10:02.280 Shi Jinping. 0:10:02.760 --> 0:10:05.760 And it sounds like the governments are also responding differently 0:10:05.800 --> 0:10:08.160 this time around, right like some of these investments are 0:10:08.200 --> 0:10:09.680 actually being very much welcomed. 0:10:10.240 --> 0:10:14.720 That's exactly true. These are actually plants that bring jobs 0:10:14.920 --> 0:10:20.760 and technology and arguably prestige to the nations that have these. 0:10:21.240 --> 0:10:24.199 It's essentially a race for the technology at the moment, 0:10:24.520 --> 0:10:28.319 which is a change of course. Rather than China trying 0:10:28.320 --> 0:10:31.640 to get hold of Western technology, this is European countries 0:10:31.679 --> 0:10:35.640 that are very keen to have Chinese advanced EV plants 0:10:35.760 --> 0:10:36.600 in their countries. 0:10:37.080 --> 0:10:40.040 But it's not just prestige and shared political interests that 0:10:40.080 --> 0:10:44.640 are pushing European nations closer to China. Trump's terrorists have 0:10:44.760 --> 0:10:46.240 played a significant role. 0:10:47.080 --> 0:10:50.840 The US is already threatening the EU with thirty percent tariffs. 0:10:51.200 --> 0:10:55.880 It's not exactly designed to win friends and influence in Europe. 0:10:56.280 --> 0:11:00.320 It can only turn Europe away from the US. There 0:11:00.400 --> 0:11:05.080 are different voices in Europe advocating different paths as regards 0:11:05.440 --> 0:11:11.120 relations with China. There is an official skepticism, if you like. 0:11:11.800 --> 0:11:15.960 The official line from the European Commission Chief or Shulaf 0:11:16.040 --> 0:11:19.520 underline is to d risk as regards China. 0:11:19.640 --> 0:11:24.560 Europe is fully committed to result oriented engagement with China 0:11:24.960 --> 0:11:27.120 and this Commission is leading the way when it comes 0:11:27.200 --> 0:11:30.120 to d risking not decoupling. 0:11:30.200 --> 0:11:32.840 But that is not quite reflected in some of the 0:11:32.880 --> 0:11:37.400 individual EU member states. We recently had the Spanish Prime 0:11:37.440 --> 0:11:40.880 Minister Pedro Sanchez. He was in Beijing meeting with Xi Jinping, 0:11:41.520 --> 0:11:46.200 and he was talking very much about opening up more 0:11:46.240 --> 0:11:50.480 to China and his emphasis was on much more in 0:11:50.600 --> 0:11:54.679 terms of investment, much closer relations. But other leaders are 0:11:54.720 --> 0:12:00.720 somewhat more weary and are hedging their relations, notably the government, 0:12:00.800 --> 0:12:03.640 which is the biggest economy in Europe's the number three 0:12:03.720 --> 0:12:07.400 economy worldwide. It tends to set the tone in Europe 0:12:07.440 --> 0:12:08.480 and the EU as a whole. 0:12:08.880 --> 0:12:11.880 What are some of the concerns the reservations that specific 0:12:11.880 --> 0:12:16.160 countries have about the warming ties to China and the investments. 0:12:16.880 --> 0:12:20.520 The single biggest issue that is shared by the vast 0:12:20.559 --> 0:12:24.520 majority of EU nations, the governments, and the EU itself 0:12:24.520 --> 0:12:29.520 in Brussels is China's close relationship with Russia. European governments 0:12:29.880 --> 0:12:34.080 leaders individually, the German Chancellor, the French President, and EU 0:12:34.240 --> 0:12:38.080 officials have been making the case to Shi Jinping to 0:12:38.480 --> 0:12:43.280 exert influence on Vladimir Putine to stop the war in Ukraine. 0:12:43.880 --> 0:12:46.320 The argument is that China could exert pressure on North 0:12:46.400 --> 0:12:52.320 Korea not to supply Russia with artillery and with troops. Actually, 0:12:52.880 --> 0:12:55.440 but that doesn't seem to have had any influence either, 0:12:55.679 --> 0:12:59.160 which to take us back to the upcoming EU China summit, 0:12:59.559 --> 0:13:04.479 that will undoubtedly be a sticking point in any development 0:13:04.480 --> 0:13:06.000 towards closer relations. 0:13:06.679 --> 0:13:10.040 I'm wondering, then, where does this leave us now? Are 0:13:10.080 --> 0:13:14.440 we seeing a pivot to China from the EU side. 0:13:14.679 --> 0:13:17.480 Is there a strong sense that EU countries want to 0:13:18.120 --> 0:13:20.280 do risk or do you leverage from the US market? 0:13:20.880 --> 0:13:26.920 These are two separate but connected issues. Yes, EU nations 0:13:26.960 --> 0:13:29.120 Buy and Large do want to de risk from the 0:13:29.240 --> 0:13:33.040 US market because they see it as unpredictable. At the 0:13:33.120 --> 0:13:38.440 very least, the Transatlantic relationship is arguably in more trouble 0:13:38.480 --> 0:13:41.520 than it has been for decades. At the same time, 0:13:42.040 --> 0:13:45.880 I don't think that yet translates to a pivot towards China, 0:13:46.440 --> 0:13:49.880 for the reasons of China's support for Russia during the 0:13:50.000 --> 0:13:54.720 Ukraine War. But also there is a skepticism, an inherent 0:13:54.800 --> 0:13:59.880 wariness which has developed over the past decade, which means 0:14:00.080 --> 0:14:03.760 that Buy and Large as a whole Europe isn't quite 0:14:03.760 --> 0:14:06.760 ready to fall into bed with China, if you like. 0:14:07.280 --> 0:14:10.280 I think that there's a recognition that Europe needs to 0:14:10.440 --> 0:14:14.520 find its own path between the two giants of Beijing 0:14:14.559 --> 0:14:15.200 and Washington. 0:14:15.840 --> 0:14:19.280 Now, US Treasury Secretary Scott Bessnont had warned European governments 0:14:19.360 --> 0:14:22.600 against aligning more with China. At the same time the 0:14:22.680 --> 0:14:24.960 US seems to be cozying up to China itself. 0:14:25.640 --> 0:14:28.360 Of course, things change on a day to day basis. 0:14:28.920 --> 0:14:30.960 A few weeks ago where we're talking about threats of 0:14:31.000 --> 0:14:34.440 one hundred and forty five percent tariffs on China. Now 0:14:34.480 --> 0:14:37.600 we've seen that the US is allowing Nvidia to sell 0:14:37.880 --> 0:14:41.080 some of its AI chips to China, which is a 0:14:41.120 --> 0:14:44.320 complete reversal of the Biden administration's policy and indeed the 0:14:44.320 --> 0:14:47.520 Trump administration's policy of a few weeks ago. And we're 0:14:47.520 --> 0:14:52.480 talking about a potential she Trump summit. Trump seems to 0:14:52.560 --> 0:14:58.160 be willing to do some kind of broader deal with China, 0:14:58.320 --> 0:15:01.080 and by its very nature, I think that would carve 0:15:01.120 --> 0:15:05.320 out Europe and leave Europe further adrift, which kind of 0:15:05.480 --> 0:15:08.880 gives more ammunition to the calls in Europe for more 0:15:09.160 --> 0:15:10.920 autonomy here on the continent. 0:15:12.720 --> 0:15:15.480 Back to the EU China summit later this week. What 0:15:15.680 --> 0:15:18.280 outcomes do we expect from the talks? You know, what 0:15:18.440 --> 0:15:22.080 could be the biggest signals that things are warming up 0:15:22.080 --> 0:15:25.160 between the EU and China or are there things to 0:15:25.320 --> 0:15:28.040 watch in terms of flags red flags? Possibly? 0:15:29.200 --> 0:15:31.680 I think it will be very easy for the both 0:15:31.720 --> 0:15:36.080 sides to agree on the need for free trade and 0:15:36.520 --> 0:15:42.000 to call out protectionism. They are highly unlikely to name 0:15:42.040 --> 0:15:46.680 the US or Donald Trump, but they will, presumably, I 0:15:46.720 --> 0:15:50.080 would imagine, put out a robust statement in terms of 0:15:50.640 --> 0:15:57.400 global values, multilateralism against unilateralism going it alone. So reading 0:15:57.440 --> 0:16:00.800 between the lines is clear that they don't like the 0:16:00.920 --> 0:16:05.640 approach of the Trump administration slapping tariffs and unilaterally pulling 0:16:05.680 --> 0:16:08.640 out of the Paris Climate Accord and so on. I 0:16:08.720 --> 0:16:12.400 think that they will agree on climate issues. One of 0:16:12.720 --> 0:16:18.320 the biggest potential sticking point is over this China support 0:16:18.360 --> 0:16:24.240 for Russia. China is still withholding rare earth experts to Europe. 0:16:24.600 --> 0:16:28.080 I guess the issue really for me is whether these 0:16:28.120 --> 0:16:30.560 blow up and come out into the open, or whether 0:16:30.560 --> 0:16:33.080 they manage to keep them behind closed doors and maintain 0:16:33.240 --> 0:16:36.280 a unified stance on those points they can agree on. 0:16:46.160 --> 0:16:48.920 This is The Big Take Asia from Bloomberg News. I'm 0:16:48.960 --> 0:16:52.560 wanha To get more from The Big Take and unlimited 0:16:52.600 --> 0:16:55.560 access to all of Bloomberg dot Com, subscribe today at 0:16:55.600 --> 0:16:59.520 Bloomberg dot com slash podcast Offer. If you like the episode, 0:16:59.640 --> 0:17:02.160 make sure to subscribe and review The Big Tick Asia 0:17:02.240 --> 0:17:05.200 wherever you listen to podcasts. It really helps people find 0:17:05.240 --> 0:17:07.840 the show. Thanks for listening, See you next time.