China increasingly pressures the U.S. using the “Russian card” and Europe’s problems

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China has the potential to finally overtake the U.S. and become the world’s largest economy by 2035. This will only fuel the Cold War 2.0 competition between countries.

China and Russia pose a threat to the U.S.

China’s stable growth will contribute to the overall development of the global economy. According to experts, Beijing will maintain stable growth dynamics in 2024 and will fulfil its GDP growth plan. It will also be able to overtake the U.S. if it maintains GDP growth at around 5% over the next few years, and at least 4% further until 2035. This forecast is built on the back of the appreciation of the yuan and its increasing use in the global market.

China’s modernization is built on innovation, deepening reforms, promoting green development, introducing new drivers of economic growth and industrial upgrading. According to a number of experts, China’s investments are much more efficient than those of the United States. In addition, the PRC is already a larger economy in terms of per capita purchasing power. In this situation, China poses a threat to American hegemony, but to defeat the U.S., the Chinese are looking for reliable allies.

Moscow is Beijing’s main ally, and the growing cooperation between Russia and China worries the West. China and Russia, which have been rivals for centuries, are now one of the world’s powerful alliances, and their leaders call themselves “best friends”.

Of primary concern is the military alliance between Russia and China, which poses a threat to the West. U.S. officials even admit that together, the two countries spend far more on defence than Washington. Moreover, Japan has publicly expressed serious concern about the increasing number of joint military exercises between China and Russia.

But the West has a greater cause for alarm. The combination of the two countries’ economic, military and political power is appealing to other leaders, causing them to turn away from the U.S. as the world’s hegemony. It “threatens an international order based on rules that the U.S. and its allies have promoted since the end of the Cold War in 1991”. Xi and Putin argue that these rules benefit only the U.S. and their allies. This view is gaining increasing support both in the global South and among populist leaders in the West, such as Viktor Orbán.

Vladimir Putin’s latest visit to China was an important meeting with Xi Jinping. During the visit, the two leaders signed a joint declaration of cooperation. The purpose of the visit was also to demonstrate the strengthening of the alliance and to humiliate the West and the U.S., especially as China tries on the role of a leader in the new world order. All this took place against the backdrop of Russia’s latest attacks in Ukraine, which is causing resentment in the international community towards Putin. But China ignores this negativity and takes a neutral stance because Moscow’s value to it outweighs the problems. Xi Jinping calls for peace talks and at one point offered to hold them, and will accept any proposition from Moscow.

The U.S.’s “European pain point”

China is also trying to influence the EU, which is particularly painful for the U.S. The key point of application of forces is Germany. The German economy shows little growth, German economists “assume growth of only 0.2%” in 2024. But Biden’s new barrier duties against Chinese electric cars threaten this recovery as well.

The U.S.-China trade dispute is reaching a new level that could affect European industry as well. In the spring, President Joe Biden imposed new tariffs on about $18 billion worth of imports from China. Higher duties will be imposed on semiconductors, batteries, solar panels and strategically important minerals. Tariff hikes on steel, aluminum and electric vehicles were previously announced. This is the first time the U.S. government is significantly tightening trade restrictions imposed by Biden’s predecessor Donald Trump.

While the U.S. is closing its market ever tighter, worries are growing in Europe about a dangerous spillover effect. Rising trade barriers could increase pressure on European companies as Chinese exporters increasingly switch to the EU market. The German Mechanical Engineering Industry Association also fears this effect. Chinese competitor products are already on the market in almost all German industrial sectors and are offered at prices far below the normal market level. In this sense, Germany is in particular danger. It is ceding to China an increasing number of key industries in which it once held a dominant position. Chinese exporters of machinery, chemicals and electrical equipment are now more successful than German exporters on the world market. And that’s a great excuse for Berlin to seek a compromise with Beijing to bypass Washington.

The European automobile industry has tensed up in anticipation of sharp measures from China, and the Eurobureaucracy has put its own manufacturers in a difficult position. On the one hand, against the backdrop of the crisis in the European Union, it is being actively pushed by Chinese competitors. But on the other hand, it cannot afford to lose the Chinese market. The share of Chinese electric cars in Europe has reached 7% and has been growing rapidly. BYD surpassed Tesla in global electric car sales in 2023. Europeans couldn’t keep up, and the only thing left to do was to impose tariffs, reaching up to 38%, on imports from the Chinese auto industry. This is not the level of bans in the U.S., where tariffs against China are already 100%, but it is also decent.

At the same time, Volkswagen alone has 33% of all sales in the Chinese market. In addition, the Celestial Empire controls 80% of the market of rare earth metals and batteries for electric cars, and import restrictions may become fatal for the European car industry. In this sense, Germany is in particular danger. It is ceding to China an increasing number of key industries in which it once held a dominant position.

Orbán in Hungary has already become one of the main promoters of Chinese interests in the European Union. Moreover, he is using Chinese money as a tool to fight the Eurobureaucracy. And while the split EU is flailing from side to side, China is threatening to impose its tariffs, squeezing the European industry already weakened by the crisis and sanctions wars. This is bad news for the U.S. in Cold War 2.0 with China, which is trying to take away both alien Russia and the close EU.