European elites position themselves in the U.S. "decoupling" debate by emphatically rejecting the U.S. terminology and strategy.

Their stance is one of pragmatic "de-risking, not decoupling," a carefully calibrated effort to protect their deeply vested economic interests in China while minimizing strategic vulnerabilities.

The European position is driven by a profound and complex economic reality that differs significantly from that of the U.S.: China is an irreplaceable market for core European industries.

The Strategic Position: De-Risking, Not Decoupling

The term "de-risking"—formally adopted by European Commission President Ursula von der Leyen—is the cornerstone of the EU's China strategy. This phrase serves three critical functions for European elites:

1. Semantic Distinction: It creates distance from the U.S. policy of "decoupling," which implies a broad-based economic severance that Europe's economy cannot afford.

2. Internal Consensus: It is a sufficiently ambiguous term to be embraced by both "China hawks" (mostly Eastern Europe and parts of the Commission) who prioritize security, and "China doves" (especially German business and government) who prioritize economic ties.

3. Policy Focus: It narrows the focus to "excessive dependencies" in specific, critical areas (e.g., raw materials, certain technologies) rather than the entire trade relationship.

The core message to the U.S. is clear: the EU shares concerns about China’s unfair trade practices and strategic rivalry, but its economic policy must prioritize co-existence and rebalancing over isolation.

The Economic Drivers: Why Decoupling Is Unthinkable

European resistance to decoupling is rooted in the reliance of key European industries on the Chinese market and supply chain, which directly represents the interests of European economic elites.

1. The Automotive Sector (Germany)

The German automotive sector, a cornerstone of the European economy, has the highest exposure to China. Companies like Volkswagen, BMW, and Mercedes-Benz treat China not merely as a market, but as a crucial manufacturing, research, and development base.

• Market Scale: China remains the single largest market for many premium German cars. Decoupling would instantly crush a massive percentage of their global sales and profits.

• Technology Transfer: Chinese partners and local competition are now critical to R&D in electric vehicles (EVs), batteries, and digitalization. German elites see engagement, not disengagement, as the way to remain competitive in the future of mobility. Their interest is in defending their global competitive position, which currently runs through China.

2. High-End Manufacturing and Capital Goods

Beyond autos, European companies in high-end machinery, industrial components, and chemicals (e.g., Siemens, BASF) view China as indispensable. These companies rely on the enormous scale of China’s industrial base for both selling their complex machinery and sourcing essential components. Cutting off this market would undermine their economies of scale and global price competitiveness.

3. Financial and Services Exposure

While U.S. tech companies are the primary target of China-related security concerns, European financial institutions and service providers are heavily invested in Asia. While this sector’s exposure is less headline-grabbing than that of the auto industry, a forced decoupling or collapse of the Chinese economy would result in massive balance sheet shocks for major European banks and insurers.

The Policy Instruments: Building a "European Third Way"

To execute the "de-risking" strategy without fully aligning with U.S. decoupling efforts, European elites have been building their own "defensive toolbox"—a suite of new regulatory instruments designed to achieve autonomy without rupture.

1. Investment Screening and Anti-Coercion

The EU has fortified its ability to screen Foreign Direct Investment (FDI) into Europe to protect critical infrastructure and technology. More notably, the Anti-Coercion Instrument (ACI) is a new economic defense tool that allows the EU to deploy countermeasures against any country that tries to weaponize trade ties—a clear response to China's use of economic leverage against EU member states (like Lithuania). These tools are designed to increase Europe's resilience and capacity for strategic autonomy, allowing it to push back against both Chinese pressure and, implicitly, U.S. extra-territorial overreach.

2. Supply Chain Diversification

Rather than cutting ties with China, the policy is to "diversify away" from excessive reliance, especially in areas vital for the green and digital transitions (e.g., rare earth minerals, solar panels, battery components). This means increasing trade with partners in Southeast Asia, Latin America, and Africa (the "Global Gateway" strategy), thereby reducing Beijing's leverage without abandoning it as a partner. This is a subtle yet crucial difference from the U.S. goal of entirely starving China of certain technologies.

3. Regulatory Leadership (The Brussels Effect)

European elites often seek to project their power by establishing global regulatory standards (the "Brussels Effect"). By focusing on issues like data governance, carbon border taxes, and sustainable corporate due diligence, the EU attempts to set the terms of engagement for all companies operating in its market, including Chinese firms, asserting its own power rather than simply following the U.S. lead.

The Internal and Transatlantic Rift

The European elite position is not monolithic and is constantly threatened by internal divisions and transatlantic friction.

• Internal Divisions: There is a clear divide between member states like Germany, whose industrial interests demand engagement, and others like the Baltic states, whose greater security concerns push them toward closer alignment with the U.S. on China policy. The EU mechanism struggles to maintain a unified stance when national economic interests diverge so starkly.

• Transatlantic Friction: European elites are often frustrated by the unilateral, extraterritorial nature of U.S. actions, such as the initial roll-out of the CHIPS Act or broad export controls. European companies find themselves caught in the middle, forced to choose between the U.S. technology ecosystem and the Chinese market. This tension makes full alignment with the U.S. politically difficult and economically punitive for Europe.

In essence, European elites are pursuing an "active middle ground": they are committed to their fundamental alliance with the U.S. on security and values, but are determined to safeguard their own industrial model by resisting a full-scale economic divorce from China. Their position is a calculated exercise in geopolitical risk management aimed at preserving their national wealth and industrial elite structure in an increasingly bifurcated world.