Yahoo Finance

European Commission President Ursula von der Leyen spoke with Chinese leadership today saying quote Europe and China as two of the world's largest markets must support a strong reformed trading system free fair and founded on a level playing field. Our next guest reporting suggesting that the trade war could push the EU and China into a closer trade relationship or exacerbate existing tensions. Here with more we got Gina Smiley New York Times Brussels Bureau Chief joining us now. Gina, great to speak with you. Congrats on the move over to the EU, planning for you to cover from there. Talk to me about the impact of these tariffs state side, pushing forces like an ally of the US previously, the EU into relationship with China. How does that sort of remake the global order in US alliances broadly?

Yeah, so there's this huge question hanging over the European Union and I think over all of the US trading partners at the moment, which is in a world where the US is a less reliable partner and in a world where the US may keep some amount of tariffs in place for an extended period of time, who do you turn to for trade? And I think that we're seeing a lot of people talk about making new friendships, deepening existing deals, you know, really sort of ramping up other bilateral relationships. And for Europe, that means that they're inking deals with places like South Korea, Vietnam, talking about deeper relationships with Mexico. But I think one of the most interesting questions is, does it mean closer relationships with China? Because China and the EU have had an increasingly combative relationship over the last several years over human rights issues, over support for Russia in the war in Ukraine, over variety of issues. And I think there are real questions, you know, does does this help to shift that moment? Um the answer isn't entirely clear at this point.

You know, we we've heard Trump 1.0 even be vocal about how the EU has certainly targeted some of the US-based tech names. So how have we also seen that transpire into Trump 2.0 and that be part of the kind of contentiousness in the first three months of this new and reboot administration?

Yeah, so the reason that the US tech companies talk a lot about the EU and its regulations is relatively simple. It's because the EU is an absolutely massive market for these companies. If you think about the Metas and the Googles and the other tech companies of the world, they're making a lot of their revenue from the European Union's 27 member states. And because it's such an important market, the fact that it has stricter regulations than the US is a very expensive prospect for a lot of these tech companies. That is something that the Trump administration has lent a very sympathetic ear to. We've seen Trump administration officials talk about digital services taxes in the EU. We've seen them talk about the digital services act, which is really about sort of what kind of content's on these platforms, and we've seen them talk about the digital markets act, which is really about how big these platforms can be. And so we've really seen this full onslaught against, you know, the way that Europe regulates tech. On the flip side, we've seen the Europeans looking at the same companies and saying, you know, we can weaponize these in the trade war. You know, if if you hit us with trade penalties, and if negotiations are not forthcoming, we can talk about some kind of tariff or some sort of tax on services that could potentially hit these big tech these big tech companies, and that could be part of our rebuttal. And so I think it's a big emerging is a big flash point where we probably haven't heard the end of it at this point.

Gina, how have you thought through how much pain a retaliatory measure like that could cause? Some of these tech companies and more broadly, can the EU afford to tariff US tech to that degree?

Yes, so we have absolutely no idea what this would look like. Um this is a tool that's never been tried before, the one that they would use to potentially hit tariffs on the on the services companies. Haven't used it before, there's no clear idea of what the design would look like. So I think it's pretty impossible and premature to suggest what the cost to the companies would be. Um I do think that there are significant challenges to the EU in designing something like this. Um one big problem with hitting a Google or hitting a Microsoft cloud with some sort of tax or some sort of limitation here in the EU is what do you replace it with? You know, what do what do European consumers use instead? And so this would have to be carefully designed. I think we're very early days. The the European Commission is not even openly talking about doing this. This is just something that European officials more broadly have been talking about. And so I think, you know, this is this is a saber rattling exercise at this point. It's not clear that it's going to become a real thing.

Gina, great to see you. Thanks so much for the time this morning or this afternoon in your case.

Thank you.