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Europe's China Dilemma: Trade War or Economic Partnership? | When Titans Clash — Transcript

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0:01A billion euros a day.
0:04That's the scale of Europe's trade
0:06deficit with China.
0:10>> Our trade deficit with China has reached
0:13a tipping point.
0:14Some say the second China shock is
0:17looming, but it's already here.
0:19It leads to deindustrialization in the
0:21industrial heartlands of Europe.
0:23>> [music]
0:23>> This is unsustainable.
0:27>> Across some of Europe's industrial
0:29heartlands, companies are cutting jobs.
0:33Chinese manufacturers
0:34>> [music]
0:34>> are now formidable competitors.
0:38Europe's industrial decline is also
0:40feeding a [music] wider political
0:42anxiety across the continent.
0:45With far-right political parties gaining
0:47ground across [music] European states.
0:50>> The serious figure is 10,000 jobs in
0:52manufacturing in Germany alone every
0:55month. That just showcases [music] how
0:57big the impact is, and of course, it
1:00translates into politics.
1:03>> But China offers a different view.
1:15Even as trade tensions escalate, Chinese
1:18investment continues to pour [music]
1:20into Europe.
1:21>> I'm all in favor of facilitating Chinese
1:25investments in Europe, including in
1:28areas like the car industry.
1:37>> Despite domestic pressure, European
1:39companies have also made substantial new
1:42investments in China.
1:44>> China has emerged as a fundamental part
1:46of the innovation ecosystem. We actually
1:50are very proud to announce this
1:51investment of 100 billion yuan.
1:54>> Leaders in Europe mold difficult
1:56questions. Is China a partner or a
2:00threat?
2:01Should European companies de-risk
2:03[music] from the competition or
2:04integrate further into China?
2:09>> [music]
2:33[music]
2:34>> In 2026, hundreds of Volkswagen
2:37employees in Germany rallied against
2:39plans to close their plant.
2:44Volkswagen has approved a massive
2:47restructuring plan to cut 100,000 jobs
2:50by 2030.
2:53Siding high cost, weak demand, and
2:55fierce competition from Chinese EV
2:57manufacturers.
3:00The job cuts won't just impact
3:03Volkswagen employees.
3:17>> [music]
3:27>> It's not just in the auto sector.
3:30Chinese manufacturers are increasingly
3:33challenging European companies in
3:35machinery, chemicals, and other advanced
3:37industries.
3:42Jörg Wuttke served as the president of
3:44the European Union Chamber of Commerce
3:46in China for 10 years.
3:49He now advises EU governments.
3:53>> It is not just the battlefield Europe,
3:55it is the global market. The global
3:58south was basically uh where Chinese
4:01companies and European companies are
4:03competing.
4:07>> There is growing global debate over what
4:09some call the China shock.
4:12Proponents of the concept argue the
4:14first China shock was from its low-cost
4:16goods.
4:19China shock 2.0 centers on high-end
4:22manufacturing from electric vehicles to
4:25batteries.
4:27China shock 3.0 could come from
4:29AI-powered industrial humanoids, service
4:32robots, and other smart Chinese exports.
4:39>> We can bring down energy prices, invest
4:41and innovate more, reform our economies,
4:45but all this is undermined if our
4:48companies do not compete [music]
4:51on a level playing field.
4:53Some say the second China shock is
4:56looming, but it's already here.
4:59It shows in our communities and
5:00factories across our union.
5:03It leads to deindustrialization in the
5:04industrial heartlands of Europe.
5:07This is unsustainable.
5:17>> [music]
5:55[music]
6:00>> What is that?
6:06So you
6:18>> The industrial downturn is feeding a
6:21wider political anxiety across Europe.
6:25Economists and policy makers debate how
6:27much Chinese competition is responsible,
6:31but politically, the fear of industrial
6:33decline is becoming increasingly potent.
6:38>> [applause]
6:39>> In September 2026,
6:41Germany's far-right Alternative for
6:43Germany Party, AfD, won a landslide
6:46victory in a regional election.
6:50The result raised the prospect of
6:52Germany's first far-right [music] state
6:54government since the Second World War.
6:59Days later, tens of thousands of
7:01protesters took part in demonstrations
7:04across Germany against the AfD.
7:08>> So, the serious [music]
7:08figure is 10,000 jobs in manufacturing
7:11in Germany alone every month. Uh, that
7:14just showcases [music]
7:15how big the impact is and of course it
7:18translates into politics. Meaning, I'm
7:21sure [music] that these kind of
7:22unemployment which is generated in the
7:24kind of downturn the economy [music] has
7:26taken for a while causes the the the
7:30the rise of the right-wing party AfD.
7:34>> Far-right parties are also making gains
7:36in France, [music] Spain, and Italy.
7:41Pascal Lamy, who played a central role
7:44in negotiating China's historic entry
7:46into the World Trade Organization,
7:48explains.
7:51>> If you look at
7:53the speed of the surge
7:55of
7:56Chinese exports,
7:58if you project this 5 10 years from now,
8:01this is simply unsustainable.
8:05So, the EU
8:08has come to the conclusion that
8:11serious measures now
8:13had to be taken.
8:16Otherwise, we will have huge social
8:19problems which will translate in huge
8:21political problem
8:23which would make xenophobic political
8:26forces in Europe stronger.
8:30>> This mix of unemployment, populism, and
8:33a large [music] trade deficit with China
8:35is something the world has seen before
8:37in another major election.
8:40>> We can't continue to allow China to rape
8:44our country.
8:46>> In 2016, Trump ran an election campaign
8:49[music] alleging that China was the
8:51cause of American economic woes.
8:55President Trump claimed that a China
8:57shock has caused the US [music] to lose
8:59millions of manufacturing jobs hollowing
9:02out industry.
9:05>> play in some countries or in some region
9:10>> [music]
9:10>> like it did in the US. And I believe
9:13that the Chinese should understand
9:16that if these
9:18extremist forces
9:20would come to power,
9:22their attitude with every China would be
9:25much tougher
9:27than
9:28whether wrongs European system with
9:31let's say the traditional center left or
9:34center right parties.
9:37So,
9:39they have to make a calculation
9:41and they are usually quite good at
9:44making calculation this time because
9:46[music] they have a scale of time in
9:48their
9:49culture which is a very long one.
9:51The alternative
9:53to containing their exports
9:56might be worse for them they don't do
9:59it.
10:25>> We have a lack of demand. We have over
10:27regulated. We have the perfect storm
10:29with the increased very high energy
10:32prices. So, you cannot just blame China
10:34for this alone, but China definitely is
10:36part of that because China's swamping
10:39the markets due to their own low
10:41consumption base.
10:44>> On the 5th of October, the leaders of
10:46the EU's two most powerful and populous
10:49countries, France and Germany, jointly
10:51proposed a new trade weapon.
10:55Mets and Macron said the EU Commission
10:58should be empowered to restrict or even
11:01completely [music] cut off imports from
11:03countries seen as creating severe and
11:06systematic distortions [music]
11:08in Europe.
11:11As this kill switch was being discussed
11:13across European capitals, China and
11:16Europe entered into [music] new rounds
11:18of trade negotiations.
11:21And then, a surprise announcement on the
11:249th of October.
11:26China agreed to halve its hybrid [music]
11:28car exports to Europe over 4 years.
11:31Potentially avoiding a major trade war.
11:34[music]
11:36On the current trajectory, Chinese car
11:39exports to the EU would hit 800,000 this
11:42year.
11:44China also agreed to improve market
11:46access for a range of EU goods.
11:51>> Do you think these measures solve the
11:54problem?
11:55>> Well, let's say
11:57it's a welcome change
12:00of position because the week before
12:04the Chinese minister was saying, "No way
12:07we will not accept voluntary export
12:09restrictions." So,
12:11there has been a change,
12:13which is good news.
12:15The view on the EU side is that this is
12:18a first step.
12:20And it probably has to be followed by
12:24steps of the same kind, i.e.
12:28export restraints in area where our
12:31production system is uh most threatened.
12:35>> Yeah, because on the same day that these
12:37measures were announced, 44 different
12:40European industry bodies, ranging from
12:42solar to steel to cement and glass, they
12:47put out a joint statement saying that
12:49their industries were facing threats
12:52from Chinese trade practices. So, it
12:55looks like there is still a long road
12:57for negotiations.
13:00>> You're absolutely right. The list may be
13:03long or look long.
13:06That does not mean
13:08that the EU Commission and the member
13:10states and the European Parliament
13:13will take
13:14the whole box along the whole list.
13:17There are areas
13:19where
13:21losing our industrial capacity and
13:23know-how is a big problem.
13:26There are areas where we have to
13:28compromise.
13:29There should be some [snorts] other
13:32steps, which does not mean that we will
13:34indulge in a whole range of total
13:38protectionism all along. The
13:40manufacturing uh supply chains.
13:55>> China's economic relationship with
13:58Europe is undergoing profound
13:59transformation.
14:02Intense competition with China is
14:04costing European jobs.
14:07But China's growing [music] economic
14:09presence in Europe also tells another
14:11story.
14:12Sometimes, the Chinese company isn't the
14:15competitor threatening European jobs.
14:18It's the investor saving them.
14:22The city of Ludwigsburg in Germany is a
14:24place where you'd find this example.
14:29The city is home to Ziemann, a company
14:31that has made beer brewing equipment
14:33since the year 1852.
14:38Klaus started work as an apprentice with
14:40Ziemann when he was 16 and worked his
14:43way up.
14:44But in 2012, he was nearly out of a job
14:47when the company confronted [music]
14:48bankruptcy.
14:51>> Well, I had
14:52yeah, challenging time, of course, and
14:55yeah, finally we had to recognize there
14:58is no other way than to sell the company
15:00and look for a new investors.
15:15>> The new shareholder was China
15:17International Marine Containers Co.,
15:19also known as CIMC.
15:21Ziemann employees had some reservations
15:24[music]
15:24about the takeover.
15:26>> We had always a a full German or
15:28European management. Very often a new
15:31management is introduced when the
15:33shareholder changed.
15:42>> During the early stages of negotiations,
15:44something happened that took the Germans
15:46by surprise.
15:54The Dutch team came from another company
15:56in the Netherlands that CIMC acquired.
16:12Completing the acquisition was only the
16:14beginning. The next challenge for the
16:16Chinese shareholder was how to build
16:18trust [music] and how to turn around
16:20losses at the company.
16:23CIMC chose to retain the existing German
16:26management team.
16:27It also adopted a more flexible [music]
16:29approach to management. Rather than
16:31becoming directly involved in the
16:33company's day-to-day operations.
16:35These measures helped foster greater
16:38integration between the Chinese and
16:40German sides.
16:42>> Important [music] business topics like
16:44investments, capex projects, growth
16:47initiatives,
16:49all that was aligned of course with the
16:51Chinese shareholders, but in the daily
16:52business, in the daily operations,
16:55we have been quite independent. [music]
16:57>> With backing from its Chinese
16:59shareholder, the company has secured a
17:01number of major [music] international
17:03contracts in recent years.
17:06>> We have now a very big financial
17:08background [music] for big projects to
17:10execute them, and as well, it opens up
17:13our market.
17:16>> Our supply chains in the recent years
17:18with international projects, a lot of
17:20equipment is coming [music] of course
17:22out of our factory in China, but also
17:25from other countries. We are not that
17:27much focused on German equipment
17:29anymore.
17:31>> Siemens has returned to profitability.
17:34>> In the meanwhile, after a couple of
17:36years to
17:38working together with CIMC, we are
17:42complete integrated
17:44together. We help each other as
17:46partners, and we are one company.
17:53>> Chinese foreign direct investment in
17:55Europe has been gaining momentum.
17:59It hit a 7-year high in 2025 when total
18:02FDI flow to the EU and the UK was 16.8
18:07billion euros,
18:09up 67% year-on-year.
18:14Hungary emerged as the top destination
18:16for Chinese investment,
18:18>> [music]
18:18>> attracting 3.9 billion euros.
18:22In second place was Germany with 2.5
18:25billion euros.
18:26And at third place [music] was France
18:29with 1.9 billion.
18:32Much of this investment flowed into the
18:34auto sector.
18:42In November [music] 2025, Chinese
18:45battery giant CATL and European
18:48automaker Stellantis broke ground on an
18:51EV battery plant in Spain.
18:54CATL is the world's largest EV battery
18:57maker, while Stellantis owns brands
19:00including Jeep, Fiat, Chrysler, and
19:03Peugeot.
19:04Together, they're investing more than 4
19:07billion euros in the project.
19:10>> to accelerate
19:13the transition towards affordable,
19:16accessible, sustainable
19:18mobility
19:20for all.
19:21>> This is one of the biggest foreign
19:23direct investments in Spanish industrial
19:26history.
19:27It is reported to create about 4,000
19:30jobs.
19:31The plan is for production to begin in
19:332026 and have a million EV batteries
19:37rolling off the production lines by
19:392028.
19:47In Slovakia, Chinese battery maker
19:50Gotion has partnered with Slovakia's
19:52InoBat to build another major battery
19:55plant.
19:56The factory cost over a billion euros to
19:59build.
20:00Production is expected to begin by the
20:02end of 2027.
20:04Over 1,000 [music] jobs were created.
20:07>> The first production line, which is 10
20:09gigawatt hours of production,
20:12is already being taken by Volkswagen. We
20:15are also getting a lot of requests from
20:19other European OEMs.
20:22I I'm very optimistic. We we will be
20:26expanding phase one, phase two, phase
20:29three, phase four
20:30in the next 5 to 10 years. I think uh we
20:34could easily grow to more than 40
20:36gigawatt hours.
20:43>> In Hungary, CATL is investing 7 billion
20:46euros in another battery plant. Expected
20:49to employ around 1,500 people.
20:54Chinese EV giant BYD has also
20:57established its European headquarters in
20:59Budapest and is investing [music]
21:01billions in a manufacturing plant in
21:03southern Hungary.
21:21>> You will be surprised if you see that
21:23the stock of foreign direct investment
21:25from Chinese companies in the European
21:27Union is about 200 260 billion euro,
21:31whereas the stock of European companies
21:33investing in the mainland of China is
21:35200 to 260. So, it's equal. So, how come
21:39that China has nearly invested more in
21:40Europe than we invested in China? Well,
21:42if you have a takeover like Pirelli,
21:45like Syngenta,
21:47in other companies like Volvo, for
21:49example, you have a big chunk of
21:51business going in one goal.
21:53>> China
21:54uh investments inflow into Europe is
21:57actually at a 7-year high. How how do
21:59you view these inflows?
22:02>> I'm all in favor of facilitating
22:06Chinese investments in Europe, including
22:09in areas like the car industry.
22:11>> The US has been very wary of allowing
22:14China investments into the United
22:17States, citing national security
22:19concerns.
22:20So, how does this inform the debate in
22:23Europe?
22:24>> We have the same problems as the one the
22:27US have.
22:28We have to check that
22:31devices uh which China investors would
22:35produce in Europe are safe from the
22:40national security point of view.
22:43And that probably
22:46would allow producing batteries for car,
22:50maybe not automatic driven cars. The
22:53moment there's data
22:56aspirator
22:58and the software with it
23:02then there's a
23:04red light that
23:06flashes
23:07and
23:09those in charge of checking will check.
23:13>> European companies with Chinese
23:15investors face increasing scrutiny in
23:18the United States.
23:20>> I think the challenge that we are facing
23:22in Europe is primarily if you are a
23:24German company, for example, and you're
23:26being taken over by a Chinese investor,
23:28[music]
23:30you might actually face a lot of
23:31headwinds here in Washington
23:34because they perceive that you have
23:36political masters that might have a
23:38different idea.
23:39>> [music]
23:39>> We have the awkward situation that
23:41Mercedes-Benz, which has a 19.8%
23:43ownership to Chinese owners, [music]
23:46all of a sudden faces a bipartisan
23:48attempt by two senators in order to ban
23:50them off selling into the United States
23:52market, you know, which is ironic
23:54because they are based [music] and
23:55producing with 16,000 employees in two
23:57red states, Alabama and South Carolina.
24:00So, in a way,
24:01Europe is caught between Beijing and
24:03Washington in many, many cases, and of
24:05course that but it makes it very
24:06difficult for political, but also for
24:09economic leaders how to maneuver in this
24:11kind of minefield.
24:27>> It's been a tough time for European
24:29firms who are facing intense competition
24:31from China.
24:33But if Europe fears Chinese competition
24:35so much, why are European companies
24:38investing more in the mainland?
24:42German investment into China surged in
24:452025 to the highest level in 4 years,
24:48exceeding 7 billion euros.
24:52>> Our members tell us that in a
24:55significant number of cases, their
24:56Chinese peers, competitors,
24:59are about to become innovation leaders
25:01in their specific technology, or they
25:04are already innovation leaders, global
25:06innovation leaders. And this obviously
25:08requires
25:09German companies to be part of the,
25:11let's say, success story or the journey
25:14of these industries.
25:16>> Even as Volkswagen restructures its
25:19European operations and cuts 100,000
25:22jobs there, it is continuing to invest
25:25heavily in China.
25:27It sounds contradictory, but for
25:29Europe's biggest companies, China is not
25:32simply the competition, it is also where
25:35they hope to learn how to compete.
25:38>> At the beginning, more focused on
25:39manufacturing, but in the last years,
25:42also very much when it comes to R&D. To
25:45really make sure that we can deliver
25:48in a timely manner to the fast-paced
25:51customer preferences
25:53and their changes.
25:55>> In June 2026, Volkswagen signed an
25:58agreement with Chinese autonomous
26:00driving startup ZYT to meet demand for
26:03advanced digital and intelligent
26:05features.
26:07A spokesperson for Volkswagen called the
26:09investment a strategic necessity,
26:12especially in areas such as autonomous
26:14driving.
26:18Other Volkswagen investments in China
26:20include a 2.5 billion euro R&D center in
26:24Hefei, its largest R&D facility outside
26:27Germany.
26:29A 5% equity stake in tech firm Xpeng for
26:33over 600 million euros,
26:36and a 2.4 billion euro investment into a
26:39joint venture with [music] China's
26:41Horizon Robotics.
26:45>> We reinvented ourselves here here in
26:47China with our R&D setup, VCTC, so the
26:52Volkswagen China Technology Center in
26:54Anhui, with now even more than 3,000
26:57engineers.
26:59>> BMW is another German automaker
27:02investing heavily in China with more
27:04than 2 billion euros committed to its
27:07plant in Shenyang.
27:09The facility makes BMW's Neue Klasse EVs
27:13in China.
27:14This car was specially tailored for the
27:17Chinese market.
27:19>> It is the most Chinese car we've ever
27:21built. It features many innovations from
27:24our partnerships with leading Chinese
27:26players, as for example, battery results
27:29come from CATL.
27:31Autonomous driving set is jointly
27:33developed with Momenta.
27:35And the large language model for the BMW
27:38intelligent personal assistant is the
27:40result of our long-standing partnership
27:43with Alibaba.
27:47>> BMW has announced it will cut 8,000 jobs
27:50in Germany.
27:52>> You want to be competitive in in the
27:54biggest car market in the world in order
27:56to then be competitive
27:58>> against Chinese competitors in third
28:00markets, you know.
28:01>> For example, they are now Volkswagen and
28:04others are exporting from China into the
28:07Southeast Asian economies. They would
28:10not be competitive if this would come
28:12out of Europe because of the high euro,
28:14but also because of the the cost
28:16structure that you face in Europe. So,
28:18in a way, what is the company's
28:20decision? Of course, they want to stay
28:21in business. Of course, they want market
28:22share. Hence, they have to be more
28:24Chinese, and hence the investment has to
28:27go up. This is not something easy for
28:31European decision-makers, policy-makers
28:33because in this respect, what used to be
28:35good for Volkswagen used to be good for
28:37Germany. Now in this respect, the
28:39company definitely has to diversify into
28:42the Chinese market to be relevant in
28:44other markets at the same time.
28:47>> The pharmaceutical industry is another
28:49major area of European investment in
28:51China. [music]
28:53China has the world's second largest
28:55pharmaceutical market and accounts for
28:57around 30% of the global pipeline for
29:00innovative drugs.
29:03In 2025,
29:04>> [music]
29:05>> 11 EU health ministers warned in an open
29:08letter that Europe's dependence [music]
29:10on Chinese medicines was becoming
29:12problematic.
29:15European pharma firms [music] had also
29:17called for leaders to safeguard their
29:19industry.
29:20But some of these firms are also
29:22continuing their investments in China.
29:26In 2026, British-Swedish pharmaceutical
29:29giant AstraZeneca announced plans to
29:31invest 13 billion euros in China by
29:352030.
29:38>> In the last 5-6 years in our industry,
29:40China has emerged as a fundamental part
29:43of the innovation ecosystem in
29:45biopharmaceutical. So, we actually are
29:48very proud to announce this investment
29:50of 100 billion yuan that will go into
29:53R&D and manufacturing. Um and that is
29:56really a reflection of two things. One
29:58is of course China's growing and [music]
30:00there are lots of people in this country
30:02who need our medicines, but also China
30:05is a source of innovation. So, we invest
30:08for patients in China, but you also
30:09[music] invest for innovation,
30:11manufacturing, and export of these
30:13medicines to the rest of the world.
30:16>> These examples are what Chinese Premier
30:18Li Qiang calls China opportunity 2.0.
30:36>> What I have to do without anything
31:40>> China has been investing huge sums in
31:42research and development. From 2021
31:45[music] to 2025, China's R&D expenditure
31:49grew by 10% annually, making China the
31:52world's second largest R&D spender.
31:56At the same time, China trains about 7
31:59million university graduates in science,
32:02engineering, agriculture, and medicine
32:04every year.
32:06Government policies support incubation
32:08of large numbers of high-tech
32:10enterprises.
32:12The whole ecosystem is attracting
32:14foreign enterprises to do R&D in China.
32:19In 2025, 14,000 foreign-funded
32:22enterprises were established in the
32:24fields of scientific research [music]
32:26and technological services, up 27%
32:29year-on-year.
32:32>> Somalia
32:39>> [music]
32:50[music]
33:12>> China first row, China.
33:14>> In early May 2025, US tariffs on Chinese
33:17goods [music] reached a peak of 145%.
33:23As the trade war intensified, [music]
33:25China choked off exports of rare earth
33:27magnets to the US.
33:30Within weeks, [music] US factories
33:32producing everything from F-35 fighters
33:35and missiles to automobiles ground to a
33:38halt.
33:42In October 2025, China put further
33:45restrictions on the export of more rare
33:48earth elements and any technology or
33:50equipment used to [music] process them.
33:56The panic then was felt not only in
33:58America, but also in Europe.
34:01>> Securing supplies is only a first step.
34:05The processing
34:07of these metals is just as critical.
34:11>> A pause in the rare earth export
34:12restrictions was announced when the
34:14leaders met in October 2025.
34:19US tariffs on China were also brought
34:21down to 47% that month. [music]
34:25But the minerals remain a vulnerability
34:28today.
34:30The worry in Europe is that China could
34:33use this pressure point again.
34:36>> We still have too many dangerous
34:38dependencies.
34:39We are more than 80% [music] dependent
34:41on China for many critical raw
34:43materials. 90% for some rare earth.
34:47We have done a lot, but we are not the
34:49only ones trying to diversify. We need
34:53to urgently procure and build up
34:55reserves.
34:57No country can do this on its own.
35:00So, we need to think differently. And
35:02this is why we will establish a new
35:05European corporation on critical raw
35:08materials.
35:10It will help us obtain and stockpile
35:13what we need for electric cars, for
35:16chips and batteries,
35:17>> [music]
35:17>> for clean tech and defense, and so much
35:20more.
35:21Not only our industry depends on this,
35:24but also our independence and our
35:27security.
35:31>> On the 9th of October, the EU announced
35:3346 new investments costing 21 billion
35:37euros.
35:41But experts warn that Europe faces an
35:44uphill battle
35:45in managing the environmental impact of
35:47[music] mining,
35:49developing its own refining
35:50technologies,
35:52and creating new patents for magnet
35:54manufacturing.
35:57>> If Europe in the negotiations moving
36:00forward take tough measures,
36:02>> [music]
36:02>> are there concerns that China could hit
36:04back and hit back hard in areas like
36:07rare earth?
36:07>> Of course, there are concerns [music]
36:09with this kind.
36:10And when we propose a sort of plan A,
36:14which is uh China accepts to negotiate
36:18and act on its own,
36:20or plan B is that doesn't happen, we
36:22have to activate the sort of special
36:25safeguard system, which we call the
36:27structural rebalancing instrument.
36:29We have to factor in the fact that if we
36:32do that, China will retaliate.
36:36And the solution to that is to put
36:38together
36:40a solidarity system, a sort of a
36:43collective insurance policy
36:45that would lower the average cost of
36:49retaliation by China, which as usual
36:52and I [clears throat] know
36:54>> [laughter]
36:55>> this sort of game. I played it with the
36:56US
36:57uh when I was European Trade
36:59Commissioner.
37:00Uh we tried to focus on uh Florida for
37:04orange juice and Harley-Davidson for uh
37:08Arkansas and the the Chinese will do the
37:10same.
37:11They'll try to hit on an area which is
37:15specially sensitive one country. So, the
37:18solution is a collective insurance
37:20policy.
37:22>> I want to ask you more about plan B if
37:24it eventually happens. Who's going to
37:27pay for
37:29plan B and the kind of insurance that uh
37:32we just discussed because [music] Europe
37:34is under so much fiscal stress.
37:36>> You're absolutely correct. Protectionism
37:40has a price. But, you have to consider
37:43the other option. No doubt EU is not
37:47sort of
37:48in a mindset [music] of protectionism. I
37:50mean, we've always been open on trade,
37:52but
37:53we
37:54have to know that
37:57if we activate the plan B with a sort of
38:00a
38:01uh structural uh
38:03rebalancing instrument like the one I've
38:05been proposing, this will have a cost.
38:08And we have to limit the cost, meaning
38:12carefully selecting
38:14the areas where we need to do that.
38:17There is, for instance, a discussion
38:20about PVs. We have a debate in Europe
38:22about this between those who say,
38:25"We should have kept a PV industry." And
38:28others, and I'm more on their side, "You
38:31have one job in production. Yes, the job
38:35[music] production is in China, but
38:37there are five jobs in installation and
38:40maintenance are in Europe."
38:42So, after all, is it that stupid to
38:46import cheap PVs subsidized by the
38:49Chinese taxpayer
38:51in order to entertain a decarbonation
38:54on the European side with jobs which are
38:57created on the European side. So,
39:00I'm giving this example
39:02to
39:03express my mind that this is not, you
39:06know, all black or all white.
39:09>> Rare earths are not the only
39:11vulnerability for Europe.
39:15A high-profile tussle at Nexperia
39:18exposed another weakness.
39:20And that's legacy chips.
39:23Dutch company Nexperia, which makes
39:25these chips, was bought by Chinese owned
39:28Wingtech Technology back in 2019.
39:31They supply an estimated 40% of European
39:35automotive industry needs.
39:38In September 2025, the Dutch government
39:41took control of Nexperia, citing
39:44concerns that technology and production
39:46could be transferred to China.
39:49China responded by blocking exports of
39:51Nexperia's chips, many of which are
39:54packaged inside China.
39:58Automakers warned of an imminent
39:59shutdown
40:00>> [music]
40:00>> if they didn't have access to these
40:02chips.
40:06A month later, a US-China [music] trade
40:09agreement helped pave the way for China
40:11to resume exports from Nexperia's
40:14Chinese operations.
40:17The Dutch government subsequently
40:18suspended its intervention.
40:21But that episode still informs
40:23policymaking in the EU today.
40:27>> So, whatever we do on China, China will
40:29do to us in a different format, possibly
40:31faster and more hurtful than we could do
40:33anything on China. But something has to
40:35happen, and China has to realize that we
40:38are not sitting on our hands and
40:39actually doing something.
40:49>> Yeah.
41:21>> [snorts]
41:40>> Europe has taken measures to address
41:43these pressure points.
41:45Like signing a free [music] trade
41:46agreement with India and Latin America
41:48to expand export markets.
41:51Or implementing a critical minerals
41:53plan.
41:54But with its oldest ally becoming
41:56increasingly unpredictable, Europe is
41:59caught between a rock and a hard place.
42:02>> I'm a strong believer in free trade.
42:04But the current world order, when you
42:06look at trade,
42:07>> [music]
42:07>> is no more about free trade. On one
42:09side, you have overcapacities and over
42:12subsidies in China. On the other side,
42:14you have tariffs from the US.
42:17If we are in the only one to be naive
42:19and totally open and not to protect our
42:21industry, no chance to preserve it.
42:24If you don't have a European preference,
42:26[music] a minimum
42:28percentage of European component,
42:31it's impossible to preserve our
42:33strategic autonomy. And when we speak
42:35about strategic autonomy, it's obviously
42:37about defense and security. But it's as
42:40well about industry,
42:42agriculture, technology,
42:44finance.
42:50You have got to learn something. You you
42:52have got to learn something. You have
42:54got to learn something.
43:31>> I think maybe the China shock or the
43:33kind of China China's challenge that we
43:35face [music]
43:36might be a good reason or to tell our
43:38public
43:40audience that now [music] is the time in
43:42order to do reforms on on the
43:46market and labor market
43:47>> [music]
43:48>> to knock down protectionism in the
43:50European Union to get
43:52actually going on on the capital union
43:55that we should have. [music]
43:56So anyway it's in a way the China shock
43:59could be a good thing for us
44:00but again this transition period [music]
44:02is definitely challenging.
44:04>> We have to fix our internal problems if
44:07we want to be able to fix our external
44:09problems.
44:11Europe will not [music] be stronger
44:15against Putin, Russia
44:18or against US
44:20from Brussels [music] indulging in
44:22stupid things
44:23if we are not economically stronger.
44:28So
44:29whatever direction
44:31the no-brainer solution
44:34is to grow our economy more rapidly
44:38than is the case for the moment and we
44:41know the recipe to do that. I was with a
44:44the chief of that which I do not when we
44:46launched in some other market in 85.
44:49That's a very long time ago. We still
44:52not have a proper internal market
44:55[music] in finance, in energy, in
44:57connectivity. We have to do that.
45:00Priority, whatever you have to cope
45:02with, is
45:04make our economy more efficient,
45:07more innovative, and stronger.
45:12>> [music]

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