On "Forbes Newsroom", Fellow at the European Foreign Relations Council, Liana Fix, discusses how Europe can navigate through the ongoing discussions between the United States and China over trade and tariffs.
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00:00Hi, everyone. I'm Maggie McGrath, senior editor at Forbes. On Monday, China warned other countries
00:10to not curb their trade with China in an attempt to curry favor with U.S. President Trump.
00:18Joining us to discuss this political landscape on a global level is Liana Fix. She is a fellow
00:24for Europe at the Council on Foreign Relations. She has an expertise on Germany and European
00:30foreign policy, but also European China policy. Liana, thank you so much for being here.
00:36Absolutely. Thank you for the invite.
00:38So U.S.-China trade relations has been a major point of news over the last several weeks,
00:45really ever since Liberation Day. But let's set the stage from your perspective as a European
00:50expert. Can you kind of describe what the last few weeks have been like for European countries as
00:57America has announced these massive tariffs? Yeah. So first of all, Europeans themselves
01:03are, of course, affected by the tariffs. Donald Trump has also announced tariffs of the European
01:07Union. Now the administration has been saying they're hopeful that a deal can be struck soon
01:12because the U.S. market is obviously a big market for the U.S. side. But then the problems between
01:18the U.S. and China, the wildly escalating trade and tariff war between the U.S. and China and the
01:23fact that they are still looking for an exit strategy out of this escalation spiral also has
01:28implications for Europe. Because if China doesn't have access to the U.S. market anymore, then China
01:34has become an export superpower. Something that Germany has been in the past has now been taken over by
01:40China. China is exporting massively and has huge overcapacities in many industrial goods and many
01:46consumer goods. China will look for other markets if it can't export to the United States. And Europe
01:52is concerned that it's going to be the one market that's still open and going to be flooded by Chinese
01:57products that can't be sold anymore to the United States. That's really interesting. So what do you
02:04make of China's announcement on Monday that it basically is warning people, you know, don't team up
02:13against us in order to curry favor with President Trump? Putting that in super layman's terms, by the
02:19way. Yeah, so Beijing has been pursuing a policy of carrots and sticks towards its own partners. The
02:26carrots policy is that since the election of Donald Trump, there has been a charm offensive from Beijing.
02:31Beijing was talking about the need to uphold the multilateral order together with Beijing against the
02:38United States, which obviously rings a little bit hollow, given that China has itself contributed to
02:43undermine that order. But there's also a stick side. And the stick side is what we see now, threats by China
02:49not to try to curry favors with the United States. It's actually a confusing situation because many have
02:55expected that the Trump administration, Trump himself, will take on a pretty aggressive stance towards
03:01Beijing. That's not what they have been doing. There are hawks in this administration that would like to do
03:07that. But President Trump himself has not reached out to allies across the globe saying, hey, we all need
03:13to contain China together. He has maintained a business idea of relations with China. He has, to some extent,
03:23undermined the U.S. commitment to Taiwan, trying to get the chips production from Taiwan to the United States
03:29to make Taiwan less important to the United States. So this has been confusing for allies around the world.
03:35And now they're faced with this escalating trade war between the U.S. and China, which they
03:40fear can at some point be resolved. And then everything is good again between the U.S. and China. And
03:46allies will be left behind. So it's a lot of confusion about what exactly the strategy is
03:53behind U.S.-China policy at the moment.
03:56It's interesting that you talk about that confusion on the part of allies, because I had a conversation
04:02the other week with someone in the context of U.S.-Russia relations. And is the global order
04:10shifting was part of our conversation. We have seen President Trump in his first and second terms
04:17speak rather derisively of NATO. And I wonder about your perspective on this question. Is the global
04:25West not really a cohesive West anymore? And is that perhaps contributing to this confusion on the trade front?
04:33Yeah, absolutely. I mean, there's this idea that Donald Trump, Vladimir Putin, and Xi Jinping can kind of
04:38divide the world among themselves and create their own spheres of influence and do a kind of triumvirate
04:45to where they have their own little kingdoms where they rule. I'm not sure if that's really a correct reading
04:53of what Donald Trump is doing and what he sees. He's not thinking in 20th century Yalta, Stalin, Churchill
05:01categories of dividing the world. He's thinking more about, well, I want to be on the same level as the most
05:07powerful people in the world and I want to do business with them. So that's the very basic instinct
05:13that where he is coming from. But since he is conflating trade and tariffs with security,
05:21that makes allies particularly nervous. With Japan, he's talking about trade and tariffs, but also about
05:26Japanese security. Europeans have a very important NATO summit coming up at the end of June in The Hague.
05:32A trade and tariffs war with Trump will not be looked at separately from that. The administration
05:38is looking through all that for one lens. And for Europe, that lens is obviously a free wider lens
05:43you're not paying up. So this linkage between trade and tariffs, between security, between questions
05:51about US reliability as an ally are all coming together into one mix, which again makes it incredibly
05:58difficult to negotiate, especially for an entity like the European Union, which is only focused on
06:05negotiating trade and everything else in Europe, what security is done by NATO.
06:10That's really interesting. So just to emphasize what you just said, the conflation of trade and
06:15tariffs with security is an almost uniquely American perspective, or is that a uniquely Trumpian perspective?
06:21That's really unique. Others are doing that too. China, for example, has used a lot of economic pressure
06:29to pursue its security interests. It has pressured European countries to not support Taiwan and so on.
06:36So it's not entirely unique, but it is pretty new for the United States that these things are put together
06:42in a coercive way and in a mixture of threats. In the past, usually trade and security have been seen
06:49separately from each other and have been dealt separately with each other.
06:53Now, you talk about how President Trump has not engaged with allies to negotiate with China.
06:58It is very much a US-China conversation exclusively. What do you think will happen next? And what is the
07:07move on behalf of European leaders here? The Europeans have taken a cautious approach because they do
07:14understand that security and trade is interlinked for them. So they have said,
07:17well, we can be tough. We have the means to be tough. They have just fine beta. And then Google,
07:24so the whole digital realm is also an instrument of power that the European Union can wield.
07:29They have also signaled that they are willing to be constructive in discussions with the United
07:34States. One problem that the Europeans and especially the European Commission, which does the trade part for
07:39all EU European sees, is that those negotiations about trade and tariffs usually are incredibly
07:47complex. They take a long, long time whenever you try to negotiate something between countries.
07:52So that the approach to do a break almost about three months seems for every serious trade negotiator
08:01almost ridiculous because three months are not enough to negotiate between partners and especially not if
08:07you have like dozens of partners behind the line who also want to negotiate. So it remains to be seen
08:14how deep the negotiations will go or in the end we will just have some, you know, some very
08:20broad results that are presented as a success but actually in substance may mean less than we think.
08:26LESLIE KENDRICK That's an interesting point on the timeline. I've heard investors say something
08:30similar. That 90-day pause that some were calling for was the bare minimum in this scenario. Based on your
08:39studies and your area of focus, what can you say about President Xi's mindset right now? And what do you
08:47project as the likelihood for him to negotiate or change terms?
08:51LESLIE KENDRICK So what we've seen is a very
08:55principled Chinese stance. So they did not want to go in line with all the others who called the
09:03President, President Trump, to go into negotiations. There is a strong feeling of pride and respect that
09:10has to be respected on both sides there, on the side of President Trump and on the side of President Xi Jinping.
09:15LESLIE KENDRICK And this strong conviction that China will not go to US pressure to the same
09:19extent as other countries do. This has also to do with China's own self-perception of its role in the
09:25world. But on the other side, there's also a lot of nervousness in Beijing because the United States
09:32has behaved so differently than they knew from past US administrations, even from the first Trump
09:37administration. Let's for example take the war against Ukraine, which China is supporting Russia and
09:43allowing Russia to continue this war. Suddenly, Russia and the United States are doing a kind
09:48of rapprochement, which leaves China, the traditional partner of Russia, weirdly on the sidelines. Although
09:54it played this important role in supporting Russia's war, which makes Beijing nervous. The rapprochement
09:59being excluded from any ceasefire negotiations. That's an additional example that shows that
10:06also from Beijing's perspective, there's a strong, strong idea that China will not just be bullied
10:12around, but also a strong nervousness about what's actually the whole plan and strategy behind this.
10:18LESLIE KENDRICK As we think about plans,
10:21strategies and next steps, you mentioned a NATO meeting at the end of June. What are the other events
10:26on the calendar that might prove important diplomatic moments, either for the US, China, Europe or
10:32all entities together? LESLIE KENDRICK Yes, so basically, all have to make it somehow to the
10:39summer. And if we reach that point, that will all be good, because there's a 27 meeting. And again,
10:44there is the NATO summit at the end of June in The Hague. And the conflation, as I said before,
10:50of the trade and tariff issue with security discussions will be, plus you have also ongoing Ukraine
10:56ceasefire discussions, which can also have implications on how the Trump administration views Europe and
11:02its allies. So that's something until the end of June to look out for the 27 meeting, the NATO
11:07meeting. But certainly unexpected events are with this administration and in this world to be expected.
11:16LESLIE KENDRICK And are there any meetings between
11:18the EU and China on the books? I'm wondering if Beijing's Monday announcement about don't
11:24collaborate with the Americans provoked an opposite reaction wherein countries are now calling Beijing to
11:30make deals with Beijing. LESLIE KENDRICK Yeah, absolutely. You're right. There is an EU-China
11:34summit which is planned. Originally, Xi Jinping was expected to come to Brussels. Probably now the
11:39Europeans will come to Beijing. That is planned for July. And that, again, will have big questions for
11:46Europeans if they take the summit and the preparations for that as basically an opportunity
11:53to show to the United States, well, look, we have alternatives. We don't have to work with you.
11:58LESLIE KENDRICK That's something that has been advocated
12:01by some in Europe. They say, we can't afford a two-front trade war with the United States and
12:06China. Let's get closer to China. They are more reasonable at the moment. There's little to lose
12:11for us. In reality, there is a lot to lose. So there's a risk that Europeans might see China in
12:17naive terms again just because they are so frustrated with Donald Trump. Because again,
12:22China's overcapacity challenge is a huge challenge for European industries, at least as big as Trump's
12:29tariff challenge. And then again, China is also a threat to Europe's security through its support for
12:34Russia's war. So it is an easy temptation to go in and see China as Europe's answer to Donald Trump.
12:41LESLIE KENDRICK Much, much caution. Is there an upside
12:47scenario and a downside that you're looking at or a bull case and a bear case to use Wall Street terms?
12:52Again, it's a crystal ball question, but I'm curious where your head is on this.
12:56LESLIE KENDRICK Well, the upside scenario is definitely that we will
13:00see a negotiated outcome on the tariffs and trade questions between the EU and the US, which is
13:06essentially which could be beneficial to both sides, which is some great successes for the United States,
13:12some major investments and so on. Something that Juncker, the former
13:16commission president, has done during first Trump's term where he basically convinced Trump that he has done a great deal with
13:22Europe. So that's certainly what Europe is hoping for, that they will be able to achieve.
13:27There's hope that if they go into the NATO summit with increased defense spending and so on,
13:31that will prevent the United States and Donald Trump from basically turning his back on NATO.
13:37And they hope that in Ukraine's negotiations, Russia will fall into its own trap and risk the
13:46patience of Donald Trump. So that's the best case outline. The worst case outline is everything
13:52explodes. The United States threatens its allies, threatens the Europeans with, well, you are not
13:59being helpful on trade and tariffs, you're not being helpful on Ukraine, you're exploiting us on NATO.
14:03We will walk away from all of that. That would be the maximum worst case scenario that I would see.
14:09LESLIE KENDRICK Well, I guess we have no
14:11choice but to perhaps hold our breath or maybe try to breathe through the next few months. But in the
14:15meantime, Liana Fix, fellow with the Council on Foreign Relations, thank you so much for joining us
14:20and breaking down the global trade and negotiation landscape. We really appreciate your time.
14:25Liana Fix Thank you so much. My pleasure.
14:27Liana Fix