Beyond tariffs: why decoupling China-EU-US nexus is a lose-lose strategy

Navigating the New World Order: Why China-EU-US Decoupling Spells Global Economic Disaster

The Web Summit Lisbon 2025 discussion critically examined the proposition that a complete decoupling of the China-EU-US economic relationship would be catastrophic. Panelists, Mr. Philip Pilkington, a Senior Research Fellow, and Mr. Einar Tangen, a Senior Fellow, largely agreed, emphasizing profound global economic interconnectedness.

Mr. Pilkington argued that past decoupling attempts, like the Trump administration’s trade war, were based on a naive understanding of global supply chains. Chinese rare earth restrictions quickly led US firms to warn of economic collapse, forcing a policy reversal.

Mr. Tangen outlined China’s vision for a multi-polar world order, contrasting it with the US pursuit of unipolarity. China advocates for global security, development, and respect for diverse civilizations, asserting national security should not depend on another nation’s insecurity.

Europe faces a difficult position, caught between the US and China. Mr. Tangen suggested that Europe, despite its economic power, remains subservient to the US, which historically aimed to prevent a strong Europe-Russia alliance from becoming a formidable competitor.

This US economic strategy was historically demonstrated by the 1985 Plaza Accord, which significantly weakened Japan’s economy. Mr. Tangen noted Japan’s economy is now worth less in real dollar terms than it was then, illustrating the lasting impact of such interventions.

Panelists underscored the vital role of rare earths, predominantly controlled by China, for modern industries, especially artificial intelligence. Mr. Pilkington warned that actual restrictions would trigger a stock market crash, as the AI boom fuels much of America’s capital expenditure.

Both speakers criticized the lack of a clear “endgame” in US and European strategies concerning China. Mr. Tangen recalled the US State Department identified rare earth dependence as a problem in 2008, yet no viable alternative has been established.

The term “de-risking” was identified as a euphemism for decoupling, which is ultimately impractical. The global economy is too deeply intertwined; any attempt to sever these connections would be too late and inflict immense damage.

Mr. Pilkington clarified that tariffs are an economic tool primarily for protecting strategic nascent industries, not a magical solution for creating new ones or slowing advanced economies. Mr. Tangen added that tariffs raise costs, making exports uncompetitive and causing substantial downstream job losses.

The consensus was that full decoupling would lead to a lose-lose outcome, with no clear winners. While China would experience hardship, its government would mitigate this by fostering other markets. The West, particularly Europe, would incur significant costs, potentially leading to Western capitulation.