Conflict Over Business with China
The disputes over business relations with China are escalating in Berlin and Brussels. Washington is urging decoupling; influential German companies, including major corporations are insisting on closer cooperation.
BERLIN/BRUSSELS/BEIJING (own report) – Disputes over future economic relations with China are escalating in Berlin and Brussels. They were sparked by the Trump administration’s offer to grant countries more favorable tariffs for exports to the USA, if they reduce their economic cooperation with China. Washington is also luring automotive corporations with an exclusive cooperation in the development of autonomous driving – with the objective of jointly sidelining Chinese auto manufacturers. German car companies have long since begun close cooperation with Chinese companies. Last week, for example, BMW announced that it was developing new models in cooperation with Huawei and Alibaba, as well as with the support of the new AI start-up DeepSeek,. Around three dozen German companies have written to the incoming German government, expressing that to a growing degree they are depending on Chinese companies, which are increasingly becoming “innovation leaders.” Therefore, they are hoping for closer cooperation with China. In the latter half of July, the EU is preparing to hold an EU-China summit in Beijing.
Faced with the Choice
The disputes over future business relations with China are currently escalating due to the Trump administration’s obvious intention to specifically offer better US tariff deals to those countries that deliberately reduce their business ties to the People's Republic of China. The US government has not officially announced this policy. However, in an interview with the US Fox News Spanish-language broadcaster, President Donald Trump declared that he would favor Latin American countries having to choose between investment relations with the USA or with China: “They should do that.”[1] The People's Republic of China, for its part, firmly opposes any party reaching a deal at the expense of China’s interests, and promised that China would “resolutely take countermeasures.” Beijing announced in a statement of the Chinese Ministry of Commerce that China is “firmly opposed to any party striking a deal at the expense of the Chinese side”, and that “China will never accept it and will take countermeasures in a resolute and reciprocal manner.”[2]
Resolutely Independent
EU member states’ positions are contradictory. Spain, for example, insists on expanding its business relations with China, which explains Prime Minister Pedro Sanchez’ April 11 meeting with China’s President Xi Jinping in Beijing.[3] Italy urges closer cooperation with the USA, its second largest trade partner, after Germany. Prime Minister Giorgia Meloni first paid President Trump a visit in mid-April and received immediately afterwards Vice President J.D. Vance in Rome.[4] The EU, on the other hand, seeks to demonstrate its independence. On Tuesday of last week, one of the spokespersons for the Commission announced that although discussions about mutual trade relations with Washington are ongoing, the format of its relations to China will, by no means, be dictated. Talks with the US and relations with China are "two distinct matters.”[5] In relations with the People's Republic of China, the so-called derisking policy, consisting of scaling back economic ties, continues, without a total decoupling. However, the Commission spokesperson added, apart from the ”security and well-being” of EU citizens, there are no red lines in the negotiations.
Stabilizing Relations
In spite of this, Brussels has initiated practical steps toward carefully stabilizing relations with China. Just a few days after the announcement of the most recent US tariffs, EU Commission President, Ursula von der Leyen, best known for her pro-American and her often outspoken anti-Chinese policies, stressed in a telephone conversation with China’s Prime Minister, Li Qiang, that it is Europe and China’s responsibility, as two of the world's largest markets, to support a strong, reformed trading system, “free, fair and founded on a level playing field.”[6] Shortly thereafter, a spokesperson for the EU Council President, António Costa announced, that, an EU-China Summit will be held in Beijing probably in the latter half of July.[7] According to reports, China, for its part, is considering lifting its sanctions, imposed back in March 2021 on five European parliamentarians. The sanctions affect the Green MEP Reinhard Butikofer, who is no longer a member of parliament, and CDU MEP Michael Gahler. Reportedly, China hopes that Europe will reciprocate, particularly by allowing Chinese enterprises to invest in Europe; the EU, however, refuses to reopen the earlier negotiations on an EU-China Comprehensive Agreement on Investment.[8]
Free Trade vs. Derisking
The conflict over the course to be taken vis á vis the People's Republic of China is also escalating in Germany. The coalition agreement of the incoming CDU/CSU – SPD government proclaims, ”the relations to the USA” remain “of paramount importance.”[9] Also in terms of trade policy, “the transatlantic economic realm (…) offers the best conditions for successful global competition.” In reference to US tariffs, the incoming government coalition seeks to “avoid a trade conflict;” “in the medium term,” a “free trade agreement” should be reached with the USA. Pertaining to relations to the People's Republic of China, the coalition agreement states that the incoming government will revise Germany’s current China strategy – “to align with the ‘derisking’ principle,” according to which, economic cooperation with China should be further reduced. According to reports, the Trump administration is additionally offering German industry cooperation with US companies in the development of autonomous driving. The United States reportedly seeks “to enhance the competitive position of its tech companies, such as Google and Nividia” with an eye toward strengthening its competitiveness on the world market in autonomous driving.[10] The objective is to take over China’s share of the market with the cooperation of German car manufacturers.
China’s Innovation Forerunners
The success of this plan is doubtful. Last week, BMW announced that this year, several of its new models coming onto the Chinese market, will be equipped with AI programs from the Chinese company DeepSeek. Cooperation with Huawei and Alibaba had already been accelerated last week for the optimization of the newer models.[11] Volkswagen has announced similar strides.” “Chinese enterprises” are “increasingly assuming innovative leadership;” close cooperation with them is “decisive, for keeping abreast of innovation,” according to a letter addressed to the incoming German government. The letter was signed by around three dozen German enterprises, including medium-sized as well as major corporations. The “derisking” still being propagated in Berlin is an obstruction to this sort of cooperation and is therefore detrimental to German industry.[12] “Not less,” but rather “more commitment” in the People's Republic of China is required, “to remain economically relevant” notes the paper, whose authors also plead for “greater China competence,” while warning that the distorted [13] – image of China that predominates in Germany “represents an obstacle for German companies.” Some of these companies generate a third of their turnover and an even larger portion of their profits in China. If they had to give up their business with China, they would face an insolvable problem.
[1] President Trump: We don’t like China’s influence over the Panama Canal. foxnews.com 17.04.2025.
[2] Vivian Wang: China Warns Countries Not to Team Up With U.S. Against It on Trade. nytimes.com 21.04.2025.
[3] Carlos E. Cué, Guillermo Abril: Sánchez defiende ante Xi el acercamiento a Pekín en plena crisis con EE UU: “España ve a China como socio de la UE”. elpais.com 11.04.2025.
[4] Tommaso Ciriaco: Il fastidio di Meloni per il dialogo con Xi: non fa bene al Paese. repubblica.it 12.04.2025.
[5] Jorge Liboreiro: EU won’t decouple from China as condition for reaching trade deal with Trump. euronews.com 22.04.2025.
[6] Read-out of the phone call between President von der Leyen and Chinese Premier Li Qiang. ec.europa.eu 08.04.2025.
[7] EU-China summit expected to take place in July. brusselstimes.com 11.04.2025.
[8] Andy Bounds: China to lift sanctions on MEPs in bid to revive trade deal with EU. ft.com 23.04.2025. See also Mit gleicher Münze.
[9] Verantwortung für Deutschland. Koalitionsvertrag zwischen CDU, CSU und SPD. 21. Legislaturperiode.
[10] Christian Müßgens, Henning Peitsmeier, Gustav Theile, Benjamin Wagener: Der Balanceakt der deutschen Autokonzerne. Frankfurter Allgemeine Zeitung 29.03.2025.
[11] Wu Ziye: BMW to Integrate DeepSeek Into Several New Models in China This Year, Chairman Says. yicaiglobal.com 23.04.2025.
[12] Julia Löhr, Gustav Theile: Berlin in der USA-China-Klemme. Frankfurter Allgemeine Zeitung 14.04.2025.
[13] See Feindbild China.
