Instead of choosing between a confrontation with China and business as usual, European policymakers should examine the benefits and costs of trade sector by sector to identify where mutually beneficial arrangements remain possible. Economic modeling shows that pragmatism beats more extreme options in most cases.
NEW HAVEN—Europe has come to a crossroads in its economic relationship with China. European Commission President Ursula von der Leyen, noting in her latest state of the union address that the European Union’s trade deficit with China has reached €1 billion ($1.15 billion) per day, warned that a “second China shock” is already contributing to deindustrialization in Europe’s industrial heartlands. Nonetheless, she also emphasized that China needs access to the European market, and that both sides have an interest in finding solutions.
