“It’s Bullshit”: The Delusion of Europe’s Tariff War and the New Regulatory Wall
From Trains to Tech: How Europe Weaponised Compliance to Mask Its Industrial Inertia
In 2025, while I was working in London, my colleagues produced a documentary on the Chinese electric vehicle industry that caused quite a stir in European auto circles. During a candid interview in Stuttgart, Stefan Reindl, director of the Institute for Automotive Management (IFA), was asked a pointed question: Would tariffs help European legacy carmakers beat Chinese competition?
His response was as unvarnished as it was accurate: “Bullshit. Sorry, it’s bullshit.”(Note: At 27’41” in the documentary) He quickly outlined the reality that politicians in Brussels prefer to ignore: German manufacturers produce heavily in China, and European and Chinese automotive supply chains are inextricably linked through deep-rooted joint ventures.
Yet, a growing disconnect has emerged between policymakers in Brussels and the industrial realities they aim to shield. Instead of heeding Reindl’s reality check, the European Union has quietly erected a formidable wall of regulatory barriers. The battleground in the China-EU economic relationship has effectively shifted from macro-level diplomatic friction to a quiet, attritional struggle over compliance.
The EU’s Foreign Subsidies Regulation (FSR) has become the instrument of choice. In early 2024, the mere initiation of a deeply invasive FSR probe forced the Chinese rolling stock manufacturer CRRC to withdraw from a €610m electric train tender in Bulgaria. Fast forward to April 2026, and the EU went a step further, conditioning the approval of Lisbon’s ‘Violet Line’ metro project on the explicit exclusion of its Chinese subcontractor.
This defensive scrutiny is now spilling rapidly from public infrastructure into private commerce. The EU has recently launched an FSR probe into JD.com’s proposed €2.2bn acquisition of Ceconomy, the German parent company of MediaMarkt and Saturn. Concurrently, Brussels slapped a record €200m fine on the cross-border e-commerce platform Temu under the Digital Services Act (DSA). The message is unambiguous: Europe is abandoning its long-held free-market principles in favour of administrative strangulation.
The Irony of Europe’s ‘Section 301’ Drift
There is a profound historical irony in this pivot. For decades, the EU was the primary victim of unilateral American trade bullying, most notably through Washington’s notorious Section 301 investigations. From digital service tax disputes to the endless Boeing-Airbus subsidy saga, European leaders consistently championed the World Trade Organization’s multilateral dispute mechanisms over unilateral aggression.
Today, however, under the guise of “economic security,” Brussels is forging its own Section 301 toolkit. By weaponising the FSR, the EU bypasses the WTO entirely, relying instead on domestic administrative powers to enforce a presumption of guilt upon foreign competitors. The former defender of globalised free trade is now actively dismantling it.
The Absurdity of ‘Overcapacity’
To justify this protectionist fortress, Western policymakers have coalesced around a singular, politically convenient buzzword: overcapacity. The narrative dictates that China’s competitive edge in green technology is purely the result of unfair state subsidies.
It is a narrative that fundamentally fails the logic test. Carl Bildt, Co-Chair of the European Council on Foreign Relations and former Prime Minister of Sweden, recently punctured this rhetoric with brutal clarity: “I find the concept of ‘overcapacity’ ridiculous. Does Germany have an overcapacity in cars? France one in wine? Sweden in heavy trucks? Italy in fashion? And don’t tell me that European food exports aren’t subsidised.”
Bildt’s observation exposes a glaring double standard. Decades ago, when German and Japanese automotive titans leveraged their absolute dominance in internal combustion engine (ICE) technology to aggressively enter and dominate the nascent Chinese market, the West proudly called it “comparative advantage.” Today, when China achieves the same via a 20-year strategic bet on battery technology and extreme vertical integration—honed in the most fiercely competitive domestic market on earth—that identical comparative advantage is suddenly branded a “national security threat.”
The Cost of the Green Transition and the Reality of Inflation
More concerning is that this defensive policy stance is generating negative spillover effects on broader macroeconomic objectives. Europe has long positioned itself as a model in advancing the global climate agenda. Particularly following the outbreak of the Russia-Ukraine conflict, the reshaping of Europe’s energy supply chains has become exceptionally urgent. Securing affordable and efficient green energy and related technologies is not merely a prerequisite for achieving its ambitious decarbonisation targets; it is also critical for curbing inflationary pressures and stabilising the broader economy.
The industrial advantages and economies of scale that China has amassed in the new energy sector—spanning photovoltaics, batteries, and electric vehicles (EVs)—could have offered robust support for Europe’s green transition. There exists immense potential for deep cooperation between the two sides in technological exchange and supply chain integration. However, the proliferation of trade barriers and compliance scrutiny is increasingly undermining this prospect. Sacrificing long-term climate cooperation for the sake of short-term industrial defence essentially inflates Europe’s own decarbonisation costs artificially, and risks delaying the region’s progress in reining in inflation.
200,000 Tonnes of Pork for a Lithography Machine
Beneath the rhetoric of “overcapacity” lies the EU’s persistent complaint regarding its trade deficit with China. However, resolving a trade imbalance requires expanding the pie of high-value exports, not shutting the door to affordable imports.
The structural truth of the China-EU trade imbalance can be captured in a stark, brutal arithmetic: it takes the export of approximately 200,000 tonnes of European pork to equal the profit generated by the sale of a single high-end ASML lithography machine to China.
Europe cannot have it both ways. It cannot blindly follow Washington’s export control regime—cutting off its most lucrative, high-tech exports to China under the expansive umbrella of “national security”—and then complain that its trade ledger is unbalanced because it is only selling luxury goods and agricultural products in return. You cannot refuse to sell your partner the technology they want to buy, and then cry foul when they sell you the green industrial goods you desperately need.
The China-EU economic relationship is fundamentally complementary and mutually beneficial. Retreating behind a regulatory wall of FSR probes and tariffs is not a strategy for economic resilience; as Stefan Reindl pointed out, it is simply “bullshit” that masks a deeper confession of industrial inertia. To truly secure its economic future, Europe must muster the courage to face market competition and confidently resume high-tech, free trade.