Abigaël Vasselier: Trade is increasingly being used as a weapon

Ms. Vasselier, what do you think of the current customs decision on electric cars from China?

First of all, it's a good day for Europe! We managed to pass the tariffs, which means that we've managed to be more consequential vis-à-vis China. We've shown that Europe can respond to the distortions created by China. These measures are not US-style tariffs; they're a European-style response. And then there is a second layer to this decision, of how to do European China policy with 27 diverging national interests. It's a pretty unique situation, as we got to see the way the vote was unfolding and how pressure was working. Usually, you don't get that level of granularity.

What does the voting behavior of the member states show us?

In the case of Spain – and this concerns half of the countries that abstained – we can see how China manages to create a fear of retaliation, with which it can change the position of governments. A very important takeaway from this is: We need to prepare our member states for the fact that there might be more tariffs in the future, as Europe is going to be more consequential. There might be more tit-for-tat and more retaliation coming from China, be it real or just threats for retaliation. Europeans need to better understand how China is playing retaliation and how we can prepare for retaliation measures – whether at the government or company level. There also needs to be an honest reflection on what kind of economic model we want for Europe.

What could a future economic model for Europe look like?

It's for sure a future where tariffs are normalized, where all actors will increasingly weaponize trade, and economic coercion is going to become a feature of our economic and trade relationships.

What do you think of the German debate about the tariffs and how the country voted?

Just one year after the China strategy was published, with just one vote the Chancellor showed how fragmented the government is.

Are you saying Germany' s China strategy isn't working?

Germany's China strategy was a very positive exercise in terms of creating coherence in a country, where there are such divergent interests regarding China. The strategy managed to bring Germany behind one voice. With the vote against the EV tariffs, how much debate and how many divergent voices we've now seen, and also the fact that Olaf Scholz went against the coalition, it shows one thing: We have moved from a very good process of bringing coherence, to a vote, that completely put these efforts down. The second element is the fact that the government moved from abstention to voting against. This happened in a constellation, where they knew they would not have the majority when voting No, and that the tariffs would pass.

How do you interpret this voting behavior?

The signaling of this is extremely important. Voting No in such a constellation signals that Germany is breaking European unity. For the past six years, we have enjoyed a very good degree of unity. But my sense is by Germany taking a stand and saying: I'm against, and I'm going to make clear that everyone knows, it's undermining our unity over the long term – not just in this case but also in the future. Berlin is opening a Pandora's box: How much unity are we going to have in European China policy in the future?

Has Scholz also sent a signal to China?

I think it's clearly a signal to China: Germany will ensure our trade relationship is not so politicized, which is what China is asking. The consequence is that the Chinese now see that they can leverage Germany and some German companies to break European unity. By voting against it, Germany is also undermining European credibility vis-a-vis China because it shows that there is a big divergence in terms of the stance taken by the EU Commission and what Germany wants.

There has been a lot of friction between China and the EU. How can we create a functioning relationship?

I think what China wants is for Europe to keep its market open and to take a slightly divergent approach from the one of the US in terms of openness. However, this is clearly not happening, as we see now with the tariffs. There will be some sort of closure or at least a rise in the cost for China to access the European markets. As for the European side, I think Europe expects that the trade relation it's enjoying with China – which Europe also needs to have with China – can take place under conditions that are fair, reciprocal and non-distortive. But with the current trajectory of the Chinese economic model, that's not going to happen. That's why there's a mismatch of expectations that China cannot address and cannot do what Europe wants it to do, and vice versa. Neither of us will be able to respond to what the other wants in this situation. This is why I think it's clear that the trade frictions and political frictions will continue escalating.

What conclusions do you draw from this situation?

We need to build resilience on the European level, not just economically, but also by becoming a geopolitical player. There have been existential issues in our relationship with China before. But the EV issue is different: It touches European prosperity. Europe has imposed sanctions against Chinese actors related to security concerns in the case of cyber-attacks or serious human rights violations. While negotiations were difficult, we managed to create unity. However, regarding the question of electric vehicles, we are most divided. The case of tariffs on electric vehicles is so special because it touches Germany's unique economic position vis-a-vis China and future trade relations with China.

Understandably so: The German automotive industry's sales and market share in China have declined lately, and the German economy is dependent on the automotive industry.

I think we need to accept that we are now in a systemic competition at the economic level. But if you put yourself in the shoes of the car industry and you look at your short-term profit, probably there is still some to make and that's a business decision.

But one that is not sustainable?

I thought we had come to a common understanding of China's economic trajectory and the challenges our companies were facing in China but also in third markets. It seems that we lack a common assessment of China's economic trajectory, how it impacts Europe, and most importantly, the realization that we are in a systemic competition with China. The next fight on European-China policy will not take place in Brussels. It will take place in European capitals, and it will take place with all the stakeholders. Not only the government, but with companies and with citizens.

Do you mean that this is the beginning of fragmentation?

Yes. The German case shows how deep fragmentation can become. So far, we have observed strong divisions between the coalition members and with the most prominent German companies. The moment the trade unions realize that we will lose jobs because of China, that's the moment we are going to have a different set of conversations. When people will feel the costs of the decisions taken on China, pay more for their products or when they lose their job because of the competition with China, that's when we will see a bigger level of fragmentation. And I think it's going to come.

Abigaël Vasselier heads the Foreign Relations team at the Mercator Institute for China Studies (Merics) in Berlin. Previously, she worked as Deputy Head of Division for China, Hong Kong, Macao, Taiwan and Mongolia at the European External Action Service (EEAS) and Policy Fellow and Program Coordinator at the Asia Programme of the European Council on Foreign Relations (ECFR). She studied Chinese at China Foreign Affairs University in Beijing.