Why China Is Suddenly Europe's Big Problem

The geopolitical hits just keep coming. Now the EU’s taking on China’s electric vehicle sector…

Apparently, state subsidies have made China’s vehicles way cheaper than they should’ve been. Who knew?

I mean, it’s not like this has happened before with any other Chinese industry…

Seriously, this has been the Chinese model for years now.

Analysis by the Center for Strategic and International Studies, a Washington-based think tank found that:

For context, that was around 1.73% of China's 2019 GDP.

Second placed South Korea spent 0.67% & the US 0.39%.

And there’s a good chance that the real Chinese figure is actually higher.

China deploys all kinds of industrial policy tools, many of which are unquantifiable, and the economic data is generally, ahem, unreliable.

Here’s what the President of the European Commission, Ursula von der Leyen said yesterday:

So they’re going to open an investigation. Which will take as long as THIRTEEN MONTHS.

Then they’ll decide if punitive tariffs should be applied.

And let’s be honest. They probably should. But will they be?

Before, I’d have said it was unlikely.

But now? When the current situation is verging on existential for European production… I’m not so sure.

VW is already eyeing job cuts at Zwickau plant due to low e-car demand

Without tariffs, what’s to stop even more companies relocating production to China to benefit from cheaper costs?

Or simply being outdone by Chinese producers altogether…?

EU nations have a huge identity crisis to overcome. What is the future of the EU economic model?

It won’t look like the past. Germany can’t be relied upon as the driver anymore.

Chemical companies are leaving due to higher energy costs. Automakers are becoming uncompetitive.

Some combination of coherent industrial policy and trade protectionism will be required. The usual bureaucracy and delays will prove costly.

Meanwhile, there are people that still believe the UK vehicle industry is doing badly all because of Brexit.

Honestly, if you think Brexit alone can explain, well, anything. You’re not trying hard enough.

Right now, the EU & UK have one thing in common. They’re both passengers.

Lacking direction, leadership, identity.

The UK competence circle was completed this week.

Remember how Truss was ousted around a year ago for her ‘outrageous’ plans to grow the economy?

Jeremy Hunt came in to ‘restore order’…

Then this happened…

Guess what the solution is? 

Just to be clear, that’s another year lost.

Back in 2022, we wrote “Impossible British Things” in response to the ridiculous belief that the UK was in a crisis.

At the time it was ridiculous. Pure hyperventilation.

There’s STILL an opportunity for stagnant economies to embrace the new world.…

This was pure poetry from the WSJ:

The experiment failed before it happened. The sentiment still applies one year on.

Something will have to give. Higher interest rates will increasingly drag on the UK economy in the months ahead.