Working paper

Europe in the midst of China-US strategic competition: What are the European Union's options?

With the trade conflict between the United States and China bringing China-US strategic competition into the open, the European Union faces an urgent

Publishing date
08 April 2019

With the trade conflict between the United States and China bringing China-US strategic competition into the open, the European Union faces an urgent question: how to position itself in the competition. This paper reviews the impact of the US-led trade war against China and its immediate consequences for China, the US and the EU. Although protectionism can never be growth enhancing, European companies could see gains if the trade confrontation between China and the US ends up reducing their bilateral trade to the benefit of European companies that export to China. This is because US exports to China are concentrated in sectors that are also key for the EU’s exports to China, with the exception of energy and agricultural products. However, a solution to the US-China trade conflict that artificially increases Chinese imports from the US can only hurt European exporters. A much broader and structural deal which pushes China to reform and open up would not only be beneficial for the US but also for the EU and the rest of the world.

Against this background, this paper reviews the EU’s options in the new world of strategic confrontation between China and the US. The most obvious option would be to continue to safeguard multilateralism, but the EU should not be naïve in remaining alone, among major economic blocs, pushing for such an option. The second option would be for the EU to become more reliant on the Transatlantic Alliance. The last option would be for the EU to move its centre of gravity towards China, or at least to remain neutral between the US and China. While it might seem unrealistic today, this last option might need to be explored if the US continues to move away from multilateralism and, to some degree, from the Transatlantic Alliance. For the time being, the European Commission seems to have stepped up its thinking about the necessary conditions for stronger economic cooperation with China, which is already an important step in this direction.

About the authors

  • Alicia García-Herrero

    Alicia García Herrero is a Senior fellow at Bruegel.

    She is the Chief Economist for Asia Pacific at French investment bank Natixis, based in Hong Kong and is an independent Board Member of AGEAS insurance group. Alicia also serves as a non-resident Senior fellow at the East Asian Institute (EAI) of the National University Singapore (NUS). Alicia is also Adjunct Professor at the Hong Kong University of Science and Technology (HKUST). Finally, Alicia is a Member of the Council of the Focused Ultrasound Foundation (FUF), a Member of the Board of the Center for Asia-Pacific Resilience and Innovation (CAPRI), a member of the Council of Advisors on Economic Affairs to the Spanish Government, a member of the Advisory Board of the Berlin-based Mercator Institute for China Studies (MERICS) and an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR).

    In previous years, Alicia held the following positions: Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria (BBVA), Member of the Asian Research Program at the Bank of International Settlements (BIS), Head of the International Economy Division of the Bank of Spain, Member of the Counsel to the Executive Board of the European Central Bank, Head of Emerging Economies at the Research Department at Banco Santander, and Economist at the International Monetary Fund. As regards her academic career, Alicia has served as visiting Professor at John Hopkins University (SAIS program), China Europe International Business School (CEIBS) and Carlos III University. 

    Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in ResearchGate, Google Scholar, SSRN or REPEC). Alicia is very active in international media (such as BBC, Bloomberg, CNBC  and CNN) as well as social media (LinkedIn and Twitter). As a recognition of her thought leadership, Alicia was included in the TOP Voices in Economy and Finance by LinkedIn in 2017 and #6 Top Social Media leader by Refinitiv in 2020.

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Dataset

China Economic Database

Repository of what we consider to be the most relevant macroeconomic data for China and EU-China relations.

Alessia Amighini, Alicia García-Herrero, Michal Krystyanczuk, Robin Schindowski and Jianwei Xu