The EU opted not to fight a trade war with the US (and the Commission is taking some flak as a result). China is already fighting an industrial policy war with the EU -- and winning 1/

But we don't need to guess about the impact of China's industrial policy successes (and macroeconomic failures) on the US -- EU exports to China are already in a sustained decline 3/

The pandemic rise in the EU's deficit with China didn't prove to be transitory (the IMF still needs to do a bit more to own up to its forecast failure here) 4/

and it is pretty hard to argue that a rise in the trade deficit is a positive shock when the rise in the deficit is primarily from a fall in exports -- and thus a fall in production (there are additional impacts from third market competition) 5/

Germany's export sector in particular is taking it on the chin ... and there is growing recognition inside Germany (tho perhaps not inside VW) that Chinese industrial and trade policies are an important factor explaining the recent stagnation of Germany's economy 6/

There isn't any real doubt that China is the current auto Exportweltmeister 7/

And I think there is a growing recognition inside Europe that European interests are being damaged by China's current currency policy (following the dollar down, setting Monday aside) 8/

I framed this blog provocatively to get attention -- but also because Von der Leyen has the right instincts on China. The US should now encourage the EU to get serious about a counter industrial policy that strengthens the transatlantic economy 9/

The blog summarizes my policy advice for Europe (and for the US for that matter, the Trump administration still overrates tariffs on allies as a policy tool) -- for a more detailed exposition, see: