"A trade deficit is not a gift; it is a loan. That loan must be paid back. The Europeans who take out the loan may be insufficiently long-term in their thinking, effectively borrowing against their own futures to consume in the present. It’s up to government to look out for the prosperity of future generations."
This paragraph confuses me. Could we not substitute "Europeans" with "Americans" and have the statement be just as true? I've followed your lead on the tariff issue all along -- I'm not an economist, so I have to pick one to follow. However, I don't recall you using this description when writing about Trump's tariffs. But I do understand your arguments about very targeted tariffs.
Yeah. This whole article feels like you could find and replace european with american and it would read like a more intellectual trump tariff justification. If having a trade deficit is such an issue for europe how is not also an issue for the US which is also struggling under the shadow of deindustrialization, permitting regulation, and an outflow of capital to china that does not return to the United States?
I'm genuinely trying to understand why this is an issue for the EU but not for the US. Surely that take in silver, spit out crap, model is being applied to us just as it is the Euros.
"This whole article feels like you could find and replace european with american and it would read like a more intellectual trump tariff justification."
Bear in mind that the Trump tariffs are on both allies and adversaries. If they were just targeted to China, that wouldn't be as big of a problem. It would also make sense to target more the Chinese products that present the most risk to the U.S., rather than doing it willy-nilly.
There is a difference in that the US runs a large surplus in services, and in particular, makes a lot of money from "tech" in a way that Europe doesn't. So while *manufacturing* in the US has suffered the China shocks, average American incomes have been increasing and the most innovative industries in the US aren't affected.
Europe has a pronounced disadvantage in "tech" (ie online platforms) relative to the US because of its linguistic diversity: it's why (French) DailyMotion couldn't compete with YouTube, (German) XING couldn't compete with LinkedIn, and (Spanish) tuenti couldn't compete with Facebook.
Although the monopolizing network effects are so strong that it's uncertain that even _China_ would have its own big tech platforms were it not for the fact that the US competitors are shut out there by the Great Firewall.
Agreed. The US has been running a trade deficit with the EU for over 15 years and economists, e.g. Krugman, say that is not an issue. Noah, you seem to agree as you write "Trump’s boneheaded tariffs". The article needs to explicitly address why tariffs are bone-headed for the US but the right thing for the EU.
I think a lot of the difference is in where the tariffs are targeted. A blanket tariff doesn’t make sense (I.e. trumps on all products and countries) but Europe or the US should protect auto manufacturing, defense suppliers, etc. The difference is Europe is already struggling economically, to the point it’s a much harder sell politically and would be met with much more resistance
Protectionist tariffs against China make sense for USA too, since China is prepping for global domination of being the landlord in exchange for these unnaturally low priced exports we are buying from them. They've been pushing projects on Africans so they are the landlord of roadways and bridges and power plants in Africa. The more frightening result of buying China exports for years is the buyer's deindustrialization -- that leads to losing shooting wars, which China seems to be preparing for also. deindustrialization leads to low innovation and low capacity to make things.
Yeah, this sounds like justification for Trump tariffs, but tariffs can be done less badly than Trump's.
You could have easily substituted the US in the article for Europe. Unless Europe demands China trade with them, the outflows of Euros can develop into a problem. If China never redeems those Euros for goods, it means they didn’t get full value for their exports. Afterall what is China going to do with them?
If they redeem them at a later date, due to inflation, they will purchase less. If the amount of outstanding Euros is never used, it could be a liability if China wants payment in political favors. Let's say China sells Euros on an exchange for less, thereby lowering the Euro's value. That could be very bad.
China is looking for dominance; walking into the jaws of an alligator is plain dumb. My argument with Trump’s hamfisted tariff campaign is not that he is seeking a fairer trade. It is that he doesn’t look at services, only goods. He is tariffing intermediate goods that American manufacturers need to make their finished goods. America sells a large volume of services worldwide.
The danger of too much dependency on China is another point to consider: assume all cars, trucks, buses, trains in Europe come from China. Imagine China invades Taiwan. If EU were to complain, suddenly all the transport vehicles don't work anymore. Oops.
1) Social Compact: For years now, Europe has built a social compact of much bigger social safety net, long vacations, minimal spending on defense. It would seem this very basic compact will have to be revisited.
2) Innovation: Europe has great universities, but kills its startups with regulation. The AI bill being the latest example. This will have to change.
3) Markets change... a lot of this analysis is built on the passenger car market. Certainly a traditionally important market. However, this market itself is changing rapidly... A passenger car is a very expensive asset with very low utilization. Most of the "jobs" for the passenger car are being replaced by technology (online, ecommerce, micromobility). A rapid shift in this market is due, and will likely be led in Europe (better public infrastructure, higher population density).
In fact, the irony of the situation might well be that the old world of highways/cars/parking is replaced by a much more efficient world of virtual engagements, autonomous delivery, and minimal need for passenger cars.
The problem in 2) is more subtle: most EU countries have steep regulation thresholds for companies of certain size (25, 100, 500 employees), which incentivizes startups not to grow their headcount. This has been very problematic for them until now, but AI might change that; AIs don't count toward the headcount.
It is still about time to drop this sort of regulation. It is an aftereffect of the Industrial Age, where a single large employer was often responsible for all the economic activity in a given city and had to be restrained from abusing its position too much. This isn't a typical problem in current European megacities like London.
I see the national security concerns associated with deindustrialization, but the rest feels like a lot of vague hand waving of exactly the sort used to promote US protectionism you've regularly denounced.
It seems to me that *most* of the trouble revolves around national security. But a substantial difference is that the US economy depends a lot less on manufacturing and the US has a large suite of innovative industries, generally called "tech". Tech and other services export a lot. You can see it in Noah's graph "Effect of increasing export competition...", where the predicted loss of GDP per capita for the US is 0.05% but for Germany is 0.25%.
I'd agree about targeted protectionism, both for Europe and the U.S. (and much of the rest of the world), but I'd make an exception for solar panels, batteries, inverters, and associated gear--items which will last for 10-40 years and will further a decline in fossil fuel use and a decrease in the cost of electricity. If China subsidizes these productive items, the rest of the world should buy everything they can make.
Simultaneously, the rich countries should heavily subsidize their own industries production of these goods, so that when the Chinese clean-tech goods reach end-of-life, they can be replaced by domestic production (if energy production has not by then been again revolutionized by fusion, deep geothermal, or some other means).
Yes! Until newer climate-smart tech crosses the "valley of death" between lab discoveries and large-scale commercial production, cheap Chinese "clean-tech goods" are the world's best hope to avoid locking in ruinous climate change. The next decade is absolutely critical.
I mean, what's the big hub-bub about Global Warming? UK/Scotland climate becoming like Siberia's? Miami and New Orleans becoming islands? Trillions of coastal real estate lost in the US alone? An increasing % of residential homes becoming utterly uninsurable--and premiums skyrocketing for those still with policies?
Because Oil/Gas/Coal making good profits at the expense of literally everyone else is worth it, right? Right?
It sounds like Europe needs to do what you recommended the US do: tariff finished goods and instead import parts and processed materials. Stockpile them, even, as long as China is essentially giving them away. Use those parts and materials alongside local manufacturers to build up their militaries to counter Putin in Ukraine, and to develop their more advanced industries. Let Putin be the one to complain to Xi about China’s dumping materials on the West. In the meantime, set up alternative sources for those imported parts by investing in Africa and the poorer parts of Eastern Europe. If cheap stuff from China is like a loan, treat it like a loan: use it to invest instead of to consume.
I bought a second hand BYD Dolphin in April this year. It cost the same £24k as the Ford Focus I had bought new in 2018. £3.5K of the price was VAT which went to HM Treasury. It is a bigger, more comfortable car than the Focus, which was small and comfortable. The glory of an EV is that it can travel 250 miles for a charge cost of £8 on home charging and £30 if using a service station charger.
If your article was dated 1970 then Japan would have been the problem because the Japanese viewed any import as a luxury that could not be provided by their own manufacturers. You touch on tariffs, as Trump did, and China mentions rare earth minerals, and suddenly tariffs vanish. China is in the same position that Japan was in 1970, except that Japan was only allowed to take 11% of the UK car market. By the end of the 1980’s Japanese companies had the Nissan factory in Sunderland and several brands made in Derby. I expect that by 2040 the Chinese will have done the same. The competition with Japanese cars caused most of the British car manufacturers to cease trading during the 1980’s. It will be interesting to see how the British built car companies react to the efficiency of the Chinese competitors.
"There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to."
Does this sound like China in the 19th century, and what prompted the Opium Wars?
The Opium Wars were actually caused by the Spanish-American wars of independence!
Because the Qing Dynasty didn't mint standardized coins, Chinese merchants instead used the highest-quality international coins of the time: Spanish pesos (aka "pieces of 8") which became worth considerably more in China than their weight in silver.
When Latin American countries broke away from Spain's rule, their silver was no longer available to mint Spanish pesos, but was instead used to produce those new countries' knock-off pesos that were of considerably lower quality. The resulting currency shortage in China cause Chinese merchants to resort to using opium as a quasi-currency, and it was this that caused China's voracious demand for opium, far more than its use as a drug!
Noah, I agree completely, we Europeans cannot become dependent on high value goods of a regime like that in China.
However, what about Europe's dependence on US Big Tech (in particular cloud computing and AI)? Doesn't this have similar (security) risks for Europe?
Imagine all US government and companies data would be stored in a European cloud, would the US accept this? I doubt it.
It will be very difficult to develop a European version of cloud computing, but it is being discussed. For those interested, this gives a good overview
I agree with the military capability arguments, but am lost on the trading of goods for IOUs. I thought the explanatory framework is that China exchanges subsidized goods for Euros, which then need to be reinvested or spent in Europe. Thus Europe gets cheaper goods and capital.
I'm no economist, but if you follow the "there's nothing China wants from Europe" logic, what would you do with those Euros if you were China? I'd use them to buy assets & businesses & leverage those to my advantage, not the Europeans
Which is exactly what Japan did with its trade surpluses with the US in the 1980s. But Japan had no territorial ambitions or aspirations to global military domination.
Though buying assets has its pitfalls, too. In the 1980s, the Japanese had a lot of US$ that they needed to invest, and a considerable chunk of it went into big office buildings in big US cities. This led to a dramatic inflation of their prices and a panic about "the Japanese are buying America!!!" But they were buying into a bubble, the US owners were savvy enough to sell out, and the crash caused the investors to lose hundreds of billions. The Wall St. Journal had a post-morem, "There have been three bubbles in commercial real estate in the 20th century. At the end, all were sold to foreign investors, the first two times to the British and the third to the Japanese." ... One of the warning signs of an asset bubble is that some new class of investor/suckers is buying the assets at a high price; usually it means that the experienced investors have realized it's time to find a greater fool and cash out.
"enjoy the high-quality cars". Honestly it's what I expect from someone who likely moves everyday by means other than a personal car. I tried Chinese cars (even briefly owned it, sadly, note: from a huge and famous Chinese brand) and they're some of the worst pieces of crap ever driven (not all, of course, but likely the vast majority). 70% of them just feel and drive like 90s/early 2000s cars.
The key is that they're very cheap in some markets because they are horrendously subsidized by the Chinese government.
Not saying that everything is crap, and they certainly made huge advancements, it's just that this unconditional praise sounds like someone I would read from a urbanist obsessed with walkable cities who drove his last car in 1998. Maybe.
One of the anti-car urbanists which I follow on social media (Matthew Lewis: @mateosfo on X or @mateosfo.bsky.social on Bluesky) went further and actually explicitly called for the destruction of all non-Chinese car makers!
Their claim is that non-Chinese (and especially US) car makers are joined at the hip to the oil industry and will never willingly shift to EVs in a real way (as opposed to claiming to do so for PR purposes) and that the are responsible for mass deaths and injuries by marketing addiction to power, speed and acceleration to their customer base of paranoid suburbanites.
(And car _dealerships_ are of course a key bastion of GOP power at a state and local level: these dealerships stand to be wiped out by a transition to EVs as they make most of their money from repairs and maintenance, which EVs inherently require far less of than ICE cars.)
"power, speed and acceleration" is something that EVs have in droves, and getting rid of the oil industry won't to anything to cure any speed junkies out there. Electric vehicles deliver max torque instantly. You can go zero to sixty under two seconds in an EV, which would be hard even for a Lamborghini to do.
Good point that EVs can out-accelerate ICE cars, which is likely why Tesla EVs (the first major examples to be marketed on performance rather than environmental benefits) have such a high crash rate.
Although one thing that EVs don't have that viscerally appeals to car junkies is the roar and vibration of a powerful internal combustion-engine.
I can certainly believe it, I've seen this subtle praise for Chinese EVs compared to the "terrible" legacy American and European manufacturers.
The problem is that these guys wouldn't be able to drive a bicycle and have the passion/knowledge about cars like I have of micro-biology. The average Chinese car, even the ones coming from flash new brands, are piece of crap in one or multiple ways, they are cheaper because they're made cheaper, and because the Chinese gvt put billions on the table. One thing that is rarely said, and I say this because I talked to multiple mechanicians about this, is that after sales support and spare parts are often basically non-existent. This is the reason I chose to give mine back. Actually this was the second reason, the first one is that the electrical system went crazy and it started to behave like the demonic car from a horror movie. Again, a car made by the largest producer in china, a shiny new model.
Anyway, I don't want to deny the huge improvements made in some sectors and by some manufacturers, it's just that I can't stand another praise by urbanists who never drove a car in their lives that praise everything china does (and there's a lot done by china that is well done).
In fact if you look at the numbers, even here in Europe, they don't sell that well (even ICE ones). The typical buyer is someone who wants to buy a car that looks like a BMW X3 without paying X3 money. And very often he ends up with a trash bin that he can't repair after the first problems. Everybody knows this, and everybody still view 95% of chinese cars like trash bins for those who want the looks but don't have the money .
The author likes to travel to europe, he should just ask random people (not other guys like him) what they think of the average chery or MG car, and see them laugh at the "but chinese cars are high-quality and cheap".
While EVs do require far less maintenance than ICE cars, perhaps the Chinese EV makers (most of which had never produced ICE cars, unlike the American and European firms producing EVs) overestimated _how much_ less maintenance they required?
From what I have been told (I've been told mostly about Chinese ICE cars, but some stuff likely applies to EVs too), there are two huge problems: 1) that often their parts are less reliable and the testing cycles are much shorter and less careful than ours and so they tend to produce more defective vehicles (what happened to me), 2) they don't build with much support in mind so they don't have spare parts. One example: they might use a transmission A with some gears from a certain producer for batch A, and another transmission B in the next batch B, so now they produce vehicles with transmission B, and if transmission A breaks down you're cooked. I personally talked with mechanicians and desperate owners telling me this. A guy was waiting for like 7 months.
I want to make clear for the 4th time that I'm not talking about some 3rd tier unknown maker from a remote Chinese province. I'm talking about the number 1 and (I think) number 2 ICE Chinese manufacturers. And the various vehicles I've known of were super new, like 2021-2023 model years and produced in 2023-2024 (IIRC).
"Another idea is to take a page from China’s book, and encourage Chinese companies to set up joint ventures with European companies in order to sell their products into the European market — or even force Chinese companies to do this, with “buy European” rules."
I've often wondered why it wouldn't be a good thing if the global trade order essentially agreed that 50% of any product sold to another country must be produced in the receiving country. I fully understand that there is not global trade order to make such a demand, so this would be voluntary, but what if Europe and the US made such a declaration on their own? A 50% production level couldn't happen overnight but surely could be required over a reasonable period of time, with each successive year requiring increased domestic production of the exporting country's goods. And what's good for one must be good for all, so the US would have to set up car factories in Mozambique, for example, within a set number of years of selling their first auto in Maputo.
German car makers have fought tooth and nail against the rise of EVs for at least the last five years. They have been bone-headed about the change in demand, and failed to seize the opportunity. Now the innovation is being driven by China. China realized that electricity is a more efficient delivery mechanism of energy than direct combustion. We, the US and Europe, have been sitting on our hands for two decades on renewable technologies and on battery research. I submit that our industrial and foreign policies are very shortsighted (until the next election cycle), and inconsistent from one administration to the next. I agree we need thoughtful industrial policies and we also need industrial leaders with vision and foresight.
Europe should force the exact same policies on Chinese companies who want to do business in Europe and China did to theirs. Force partnerships with European companies retaining the majority. Force the manufacture of goods in Europe and the transfer of technology to the European partner, which can dissolve the partnership and compete directly in China and Europe. Subsidize strategic industries. Europe is a market China wants, just as China is a market Europe wants. Force a level playing field or at least play by the same rules.
"A trade deficit is not a gift; it is a loan. That loan must be paid back. The Europeans who take out the loan may be insufficiently long-term in their thinking, effectively borrowing against their own futures to consume in the present. It’s up to government to look out for the prosperity of future generations."
This paragraph confuses me. Could we not substitute "Europeans" with "Americans" and have the statement be just as true? I've followed your lead on the tariff issue all along -- I'm not an economist, so I have to pick one to follow. However, I don't recall you using this description when writing about Trump's tariffs. But I do understand your arguments about very targeted tariffs.
Of course, yes. Trade deficits work the same way with America, obviously. I wrote about it here:
https://www.noahpinion.blog/p/trade-deficits-do-not-make-a-country
Has Noah come out against tariff's on China? My understanding is:
1. Tariffs on China should be paired with alliance/free-trade strategy with allies (mirrors this post)
2. Tariffs on China should be avoided on intermediary manufacturing goods (this article doesn't grapple with this, or preclude it)
I added links to some of my posts about U.S. tariffs on China!
Yeah. This whole article feels like you could find and replace european with american and it would read like a more intellectual trump tariff justification. If having a trade deficit is such an issue for europe how is not also an issue for the US which is also struggling under the shadow of deindustrialization, permitting regulation, and an outflow of capital to china that does not return to the United States?
I'm genuinely trying to understand why this is an issue for the EU but not for the US. Surely that take in silver, spit out crap, model is being applied to us just as it is the Euros.
"This whole article feels like you could find and replace european with american and it would read like a more intellectual trump tariff justification."
Bear in mind that the Trump tariffs are on both allies and adversaries. If they were just targeted to China, that wouldn't be as big of a problem. It would also make sense to target more the Chinese products that present the most risk to the U.S., rather than doing it willy-nilly.
Yes, exactly. I was always in favor of (targeted) tariffs on China.
There is a difference in that the US runs a large surplus in services, and in particular, makes a lot of money from "tech" in a way that Europe doesn't. So while *manufacturing* in the US has suffered the China shocks, average American incomes have been increasing and the most innovative industries in the US aren't affected.
Europe has a pronounced disadvantage in "tech" (ie online platforms) relative to the US because of its linguistic diversity: it's why (French) DailyMotion couldn't compete with YouTube, (German) XING couldn't compete with LinkedIn, and (Spanish) tuenti couldn't compete with Facebook.
https://xcancel.com/CraigWilly06/status/1621493546892107776
Although the monopolizing network effects are so strong that it's uncertain that even _China_ would have its own big tech platforms were it not for the fact that the US competitors are shut out there by the Great Firewall.
Agreed. The US has been running a trade deficit with the EU for over 15 years and economists, e.g. Krugman, say that is not an issue. Noah, you seem to agree as you write "Trump’s boneheaded tariffs". The article needs to explicitly address why tariffs are bone-headed for the US but the right thing for the EU.
I think a lot of the difference is in where the tariffs are targeted. A blanket tariff doesn’t make sense (I.e. trumps on all products and countries) but Europe or the US should protect auto manufacturing, defense suppliers, etc. The difference is Europe is already struggling economically, to the point it’s a much harder sell politically and would be met with much more resistance
Protectionist tariffs against China make sense for USA too, since China is prepping for global domination of being the landlord in exchange for these unnaturally low priced exports we are buying from them. They've been pushing projects on Africans so they are the landlord of roadways and bridges and power plants in Africa. The more frightening result of buying China exports for years is the buyer's deindustrialization -- that leads to losing shooting wars, which China seems to be preparing for also. deindustrialization leads to low innovation and low capacity to make things.
Yeah, this sounds like justification for Trump tariffs, but tariffs can be done less badly than Trump's.
You could have easily substituted the US in the article for Europe. Unless Europe demands China trade with them, the outflows of Euros can develop into a problem. If China never redeems those Euros for goods, it means they didn’t get full value for their exports. Afterall what is China going to do with them?
If they redeem them at a later date, due to inflation, they will purchase less. If the amount of outstanding Euros is never used, it could be a liability if China wants payment in political favors. Let's say China sells Euros on an exchange for less, thereby lowering the Euro's value. That could be very bad.
China is looking for dominance; walking into the jaws of an alligator is plain dumb. My argument with Trump’s hamfisted tariff campaign is not that he is seeking a fairer trade. It is that he doesn’t look at services, only goods. He is tariffing intermediate goods that American manufacturers need to make their finished goods. America sells a large volume of services worldwide.
In fact, I originally wrote this about the U.S.!
https://www.noahpinion.blog/p/trade-deficits-do-not-make-a-country
The danger of too much dependency on China is another point to consider: assume all cars, trucks, buses, trains in Europe come from China. Imagine China invades Taiwan. If EU were to complain, suddenly all the transport vehicles don't work anymore. Oops.
Interesting article. Three further points...
1) Social Compact: For years now, Europe has built a social compact of much bigger social safety net, long vacations, minimal spending on defense. It would seem this very basic compact will have to be revisited.
2) Innovation: Europe has great universities, but kills its startups with regulation. The AI bill being the latest example. This will have to change.
3) Markets change... a lot of this analysis is built on the passenger car market. Certainly a traditionally important market. However, this market itself is changing rapidly... A passenger car is a very expensive asset with very low utilization. Most of the "jobs" for the passenger car are being replaced by technology (online, ecommerce, micromobility). A rapid shift in this market is due, and will likely be led in Europe (better public infrastructure, higher population density).
In fact, the irony of the situation might well be that the old world of highways/cars/parking is replaced by a much more efficient world of virtual engagements, autonomous delivery, and minimal need for passenger cars.
The problem in 2) is more subtle: most EU countries have steep regulation thresholds for companies of certain size (25, 100, 500 employees), which incentivizes startups not to grow their headcount. This has been very problematic for them until now, but AI might change that; AIs don't count toward the headcount.
It is still about time to drop this sort of regulation. It is an aftereffect of the Industrial Age, where a single large employer was often responsible for all the economic activity in a given city and had to be restrained from abusing its position too much. This isn't a typical problem in current European megacities like London.
I see the national security concerns associated with deindustrialization, but the rest feels like a lot of vague hand waving of exactly the sort used to promote US protectionism you've regularly denounced.
It seems to me that *most* of the trouble revolves around national security. But a substantial difference is that the US economy depends a lot less on manufacturing and the US has a large suite of innovative industries, generally called "tech". Tech and other services export a lot. You can see it in Noah's graph "Effect of increasing export competition...", where the predicted loss of GDP per capita for the US is 0.05% but for Germany is 0.25%.
A good article Noah 👍
I'd agree about targeted protectionism, both for Europe and the U.S. (and much of the rest of the world), but I'd make an exception for solar panels, batteries, inverters, and associated gear--items which will last for 10-40 years and will further a decline in fossil fuel use and a decrease in the cost of electricity. If China subsidizes these productive items, the rest of the world should buy everything they can make.
Simultaneously, the rich countries should heavily subsidize their own industries production of these goods, so that when the Chinese clean-tech goods reach end-of-life, they can be replaced by domestic production (if energy production has not by then been again revolutionized by fusion, deep geothermal, or some other means).
Yes! Until newer climate-smart tech crosses the "valley of death" between lab discoveries and large-scale commercial production, cheap Chinese "clean-tech goods" are the world's best hope to avoid locking in ruinous climate change. The next decade is absolutely critical.
I mean, what's the big hub-bub about Global Warming? UK/Scotland climate becoming like Siberia's? Miami and New Orleans becoming islands? Trillions of coastal real estate lost in the US alone? An increasing % of residential homes becoming utterly uninsurable--and premiums skyrocketing for those still with policies?
Because Oil/Gas/Coal making good profits at the expense of literally everyone else is worth it, right? Right?
It sounds like Europe needs to do what you recommended the US do: tariff finished goods and instead import parts and processed materials. Stockpile them, even, as long as China is essentially giving them away. Use those parts and materials alongside local manufacturers to build up their militaries to counter Putin in Ukraine, and to develop their more advanced industries. Let Putin be the one to complain to Xi about China’s dumping materials on the West. In the meantime, set up alternative sources for those imported parts by investing in Africa and the poorer parts of Eastern Europe. If cheap stuff from China is like a loan, treat it like a loan: use it to invest instead of to consume.
I bought a second hand BYD Dolphin in April this year. It cost the same £24k as the Ford Focus I had bought new in 2018. £3.5K of the price was VAT which went to HM Treasury. It is a bigger, more comfortable car than the Focus, which was small and comfortable. The glory of an EV is that it can travel 250 miles for a charge cost of £8 on home charging and £30 if using a service station charger.
If your article was dated 1970 then Japan would have been the problem because the Japanese viewed any import as a luxury that could not be provided by their own manufacturers. You touch on tariffs, as Trump did, and China mentions rare earth minerals, and suddenly tariffs vanish. China is in the same position that Japan was in 1970, except that Japan was only allowed to take 11% of the UK car market. By the end of the 1980’s Japanese companies had the Nissan factory in Sunderland and several brands made in Derby. I expect that by 2040 the Chinese will have done the same. The competition with Japanese cars caused most of the British car manufacturers to cease trading during the 1980’s. It will be interesting to see how the British built car companies react to the efficiency of the Chinese competitors.
"There is nothing that China wants to import, nothing it does not believe it can make better and cheaper, nothing for which it wants to rely on foreigners a single day longer than it has to."
Does this sound like China in the 19th century, and what prompted the Opium Wars?
This sounds like China for centuries and centuries. China imported silver and little else; good horses from the steppe tribes being an exception.
The Opium Wars were actually caused by the Spanish-American wars of independence!
Because the Qing Dynasty didn't mint standardized coins, Chinese merchants instead used the highest-quality international coins of the time: Spanish pesos (aka "pieces of 8") which became worth considerably more in China than their weight in silver.
When Latin American countries broke away from Spain's rule, their silver was no longer available to mint Spanish pesos, but was instead used to produce those new countries' knock-off pesos that were of considerably lower quality. The resulting currency shortage in China cause Chinese merchants to resort to using opium as a quasi-currency, and it was this that caused China's voracious demand for opium, far more than its use as a drug!
https://files01.core.ac.uk/download/pdf/9695056.pdf
Noah, I agree completely, we Europeans cannot become dependent on high value goods of a regime like that in China.
However, what about Europe's dependence on US Big Tech (in particular cloud computing and AI)? Doesn't this have similar (security) risks for Europe?
Imagine all US government and companies data would be stored in a European cloud, would the US accept this? I doubt it.
It will be very difficult to develop a European version of cloud computing, but it is being discussed. For those interested, this gives a good overview
https://berthub.eu/articles/posts/the-european-cloud-2025/
I agree with the military capability arguments, but am lost on the trading of goods for IOUs. I thought the explanatory framework is that China exchanges subsidized goods for Euros, which then need to be reinvested or spent in Europe. Thus Europe gets cheaper goods and capital.
I'm no economist, but if you follow the "there's nothing China wants from Europe" logic, what would you do with those Euros if you were China? I'd use them to buy assets & businesses & leverage those to my advantage, not the Europeans
Which is exactly what Japan did with its trade surpluses with the US in the 1980s. But Japan had no territorial ambitions or aspirations to global military domination.
Though buying assets has its pitfalls, too. In the 1980s, the Japanese had a lot of US$ that they needed to invest, and a considerable chunk of it went into big office buildings in big US cities. This led to a dramatic inflation of their prices and a panic about "the Japanese are buying America!!!" But they were buying into a bubble, the US owners were savvy enough to sell out, and the crash caused the investors to lose hundreds of billions. The Wall St. Journal had a post-morem, "There have been three bubbles in commercial real estate in the 20th century. At the end, all were sold to foreign investors, the first two times to the British and the third to the Japanese." ... One of the warning signs of an asset bubble is that some new class of investor/suckers is buying the assets at a high price; usually it means that the experienced investors have realized it's time to find a greater fool and cash out.
This was my exact understanding as well.
"enjoy the high-quality cars". Honestly it's what I expect from someone who likely moves everyday by means other than a personal car. I tried Chinese cars (even briefly owned it, sadly, note: from a huge and famous Chinese brand) and they're some of the worst pieces of crap ever driven (not all, of course, but likely the vast majority). 70% of them just feel and drive like 90s/early 2000s cars.
The key is that they're very cheap in some markets because they are horrendously subsidized by the Chinese government.
Not saying that everything is crap, and they certainly made huge advancements, it's just that this unconditional praise sounds like someone I would read from a urbanist obsessed with walkable cities who drove his last car in 1998. Maybe.
One of the anti-car urbanists which I follow on social media (Matthew Lewis: @mateosfo on X or @mateosfo.bsky.social on Bluesky) went further and actually explicitly called for the destruction of all non-Chinese car makers!
Their claim is that non-Chinese (and especially US) car makers are joined at the hip to the oil industry and will never willingly shift to EVs in a real way (as opposed to claiming to do so for PR purposes) and that the are responsible for mass deaths and injuries by marketing addiction to power, speed and acceleration to their customer base of paranoid suburbanites.
(And car _dealerships_ are of course a key bastion of GOP power at a state and local level: these dealerships stand to be wiped out by a transition to EVs as they make most of their money from repairs and maintenance, which EVs inherently require far less of than ICE cars.)
"power, speed and acceleration" is something that EVs have in droves, and getting rid of the oil industry won't to anything to cure any speed junkies out there. Electric vehicles deliver max torque instantly. You can go zero to sixty under two seconds in an EV, which would be hard even for a Lamborghini to do.
Good point that EVs can out-accelerate ICE cars, which is likely why Tesla EVs (the first major examples to be marketed on performance rather than environmental benefits) have such a high crash rate.
Although one thing that EVs don't have that viscerally appeals to car junkies is the roar and vibration of a powerful internal combustion-engine.
I can certainly believe it, I've seen this subtle praise for Chinese EVs compared to the "terrible" legacy American and European manufacturers.
The problem is that these guys wouldn't be able to drive a bicycle and have the passion/knowledge about cars like I have of micro-biology. The average Chinese car, even the ones coming from flash new brands, are piece of crap in one or multiple ways, they are cheaper because they're made cheaper, and because the Chinese gvt put billions on the table. One thing that is rarely said, and I say this because I talked to multiple mechanicians about this, is that after sales support and spare parts are often basically non-existent. This is the reason I chose to give mine back. Actually this was the second reason, the first one is that the electrical system went crazy and it started to behave like the demonic car from a horror movie. Again, a car made by the largest producer in china, a shiny new model.
Anyway, I don't want to deny the huge improvements made in some sectors and by some manufacturers, it's just that I can't stand another praise by urbanists who never drove a car in their lives that praise everything china does (and there's a lot done by china that is well done).
In fact if you look at the numbers, even here in Europe, they don't sell that well (even ICE ones). The typical buyer is someone who wants to buy a car that looks like a BMW X3 without paying X3 money. And very often he ends up with a trash bin that he can't repair after the first problems. Everybody knows this, and everybody still view 95% of chinese cars like trash bins for those who want the looks but don't have the money .
The author likes to travel to europe, he should just ask random people (not other guys like him) what they think of the average chery or MG car, and see them laugh at the "but chinese cars are high-quality and cheap".
While EVs do require far less maintenance than ICE cars, perhaps the Chinese EV makers (most of which had never produced ICE cars, unlike the American and European firms producing EVs) overestimated _how much_ less maintenance they required?
From what I have been told (I've been told mostly about Chinese ICE cars, but some stuff likely applies to EVs too), there are two huge problems: 1) that often their parts are less reliable and the testing cycles are much shorter and less careful than ours and so they tend to produce more defective vehicles (what happened to me), 2) they don't build with much support in mind so they don't have spare parts. One example: they might use a transmission A with some gears from a certain producer for batch A, and another transmission B in the next batch B, so now they produce vehicles with transmission B, and if transmission A breaks down you're cooked. I personally talked with mechanicians and desperate owners telling me this. A guy was waiting for like 7 months.
I want to make clear for the 4th time that I'm not talking about some 3rd tier unknown maker from a remote Chinese province. I'm talking about the number 1 and (I think) number 2 ICE Chinese manufacturers. And the various vehicles I've known of were super new, like 2021-2023 model years and produced in 2023-2024 (IIRC).
"Another idea is to take a page from China’s book, and encourage Chinese companies to set up joint ventures with European companies in order to sell their products into the European market — or even force Chinese companies to do this, with “buy European” rules."
I've often wondered why it wouldn't be a good thing if the global trade order essentially agreed that 50% of any product sold to another country must be produced in the receiving country. I fully understand that there is not global trade order to make such a demand, so this would be voluntary, but what if Europe and the US made such a declaration on their own? A 50% production level couldn't happen overnight but surely could be required over a reasonable period of time, with each successive year requiring increased domestic production of the exporting country's goods. And what's good for one must be good for all, so the US would have to set up car factories in Mozambique, for example, within a set number of years of selling their first auto in Maputo.
German car makers have fought tooth and nail against the rise of EVs for at least the last five years. They have been bone-headed about the change in demand, and failed to seize the opportunity. Now the innovation is being driven by China. China realized that electricity is a more efficient delivery mechanism of energy than direct combustion. We, the US and Europe, have been sitting on our hands for two decades on renewable technologies and on battery research. I submit that our industrial and foreign policies are very shortsighted (until the next election cycle), and inconsistent from one administration to the next. I agree we need thoughtful industrial policies and we also need industrial leaders with vision and foresight.
Europe should force the exact same policies on Chinese companies who want to do business in Europe and China did to theirs. Force partnerships with European companies retaining the majority. Force the manufacture of goods in Europe and the transfer of technology to the European partner, which can dissolve the partnership and compete directly in China and Europe. Subsidize strategic industries. Europe is a market China wants, just as China is a market Europe wants. Force a level playing field or at least play by the same rules.