Managing the US and China: sources of European power

Lessons from realism, part 1

Europe is facing a considerable challenge in defining its role in the international system. It has to manage relations with two great powers, namely the United States and China, while also taking into consideration the dynamics of the relationship between these two powers. At the same time, Europe’s own power resources are asymmetric, as its military weight remains much more limited than its economic weight. Accordingly, Europe needs to smartly calibrate the use of its power resources and adapt its strategy.

Managing the US, managing China, and managing US-China dynamics

Rethinking the use of its power resources and its strategies towards great power dynamics matters for several reasons for Europe. First, the Trump administration significantly alters the dynamics in the transatlantic relationship. Historically, the relationship has never been easy: despite deep levels of cooperation and extensive US engagement, including through security guarantees, in Europe, tensions between Europe and the US have regularly occurred — think, for example, of the war in Iraq, where the unwillingness of several European countries to support the invasion of Iraq led to a full-blown transatlantic crisis. However, partners have usually managed to overcome these differences — admittedly also often because Europeans ultimately accepted following Washington’s approach — because the equation was mutually beneficial. In realist terms, US leadership constituted a form of benign hegemony: for Europeans, this implied the provision of security through the United States, allowing them to free-ride and reduce defence spending. For the United States, deep engagement in alliances ensured unparalleled leverage on allies, which could eventually force them into compliance and enhance Washington’s global weight through allies. With an administration that openly questions the value of the transatlantic alliance for the United States and clearly aims to revisit a posture of deep engagement, with sometimes even hostile statements towards Europe, this equation has changed. As shared values and a joint commitment to the liberal international order have historically underpinned the transatlantic relationship, open criticism of European societies, as visible in Vice President JD Vance’s speech at the Munich Security Conference, have led Europeans to question the United States’ commitment to this base. Consequently, Europe now needs to deal with a situation of US hegemony which might shift from a benign one to a less benign one; for the moment, it still lacks a strategy to accommodate this change.

The second challenge for Europe is managing China. The relationship with Beijing has always varied substantively across different domains; the EU’s approach, as formulated in the Strategic Outlook published in 2019, captures nicely that European policy towards China has always required compartmentalisation, meaning a different design of relationships in different domains. The document describes China as a “cooperation partner”, an “economic competitor”, and a “systemic rival”, and therefore emphasises that the EU has shied away from a “one-size-fits-all” approach on China. The European assessment of the relationship with China has, however, clearly shifted with the start of Russia’s war against Ukraine, where Europeans have repeatedly called upon China to use its leverage over Russia to end the war — visibly without success. The shift in tone and reasoning on China is also reflected in recent decisions and policies of the EU since the EU’s “de-risking” agenda was clearly designed in light of strategic dependencies on China. Furthermore, the fact that European NATO members were willing to sign off last year’s summit communiqué, which describes China as an “enabler of Russia’s war effort”, demonstrates that Beijing is also increasingly perceived as a security challenge in Europe. Yet at the same time, European leaders regularly underline the importance of working with China on global challenges like climate change or the achievement of the Sustainable Development Goals.

As if managing relationships with Washington and Beijing individually was not already challenging enough, the relationship dynamics between the two impose additional strategic reflections on Europeans. In this context, it is important to understand that most European states and the EU have never been equidistant between the United States and China — most Europeans are allies with the United States through NATO, and the ties of the EU with the United States are closer on all political levels than they are with China. However, this does not imply an absence of challenges. Under the Biden administration, the United States’ focus on competition with China and the subsequent pressure on Europeans to follow the US approach presented a risk of entrapment for Europeans, meaning a situation where their partnerships with the United States might draw them into a conflict they would themselves prefer to avoid. This risk ultimately never materialised, but the Trump administration does not give Europeans an easier life: the strategy of the United States vis-à-vis China still remains to be defined. While some key figures in the administration like Defence Secretary Hegseth or Undersecretary of Defence for Policy, Elbridge Colby, clearly push for a hawkish US posture towards China, President Trump’s foreign policy is known for its unpredictability and the President’s quest for striking deals. From a European perspective, the US-China relationship hinges on many known unknowns, mostly the true influencers of Washington’s strategy towards China and the interest of a US-China deal; the trajectory of these factors will greatly impact Europe.

Sources of European power

Crafting European strategies, either nationally or on the EU level, requires not only an understanding of the objectives, but also of the means to achieve them. Two central objectives of state (or EU) strategy are arguably security and prosperity. Achieving these objectives requires an understanding of critical sources of power and how one’s own power relates to the power of others. Based on a realist understanding, power is defined as capabilities — more precisely, economic and military. Mobilising power to manage the United States and China hence requires Europe to tap into these resources.

It is noteworthy that Europe suffers from a considerable asymmetry of power between the military and economic domains, especially in terms of relative power, meaning in comparison to others. In terms of military spending, the United States is by far the dominant global power ($997 bn, 2024); China’s defence spending is estimated to amount to slightly less than one third of US expenditure ($314 bn); this is slightly below the collective spending of EU member states (€324 bn), which has significantly increased in recent years. If the UK and Norway ($81.8 bn and $10.4 bn respectively) are added to this, European defence spending amounts to around $500 bn. However, the big difference between the United States, China, and Europe is that there is no centralised structure in Europe overseeing and allocating the funding or defining the political objectives for spending to be translated into military power.

Economically, the picture looks different: as the EU Commission holds an exclusive competence for trade policy, meaning that the member states cannot individually set policy in these fields, it is much easier for European states to define a common approach and articulate Europe’s joint power. Although the United States GDP remains unparalleled ($29 trillion in 2024), China’s and the EU’s GDP both amounted to around $19 trillion.

Based on its relative power, it is hard to imagine that Europe could draw on its military power as a primary resource to design its strategy towards the United States or China. Within NATO and the transatlantic alliance more generally, the relationship of power is clear: even if Europeans will significantly step up their defence spending and contribute to burden-shifting, a situation where Europeans leverage this power to obtain commitments from the United States seems simply illusory. Similarly, military power will not take Europeans anywhere in designing their relationship with China. Sending frigates or even aircraft carriers to the Indo-Pacific might send a political signal towards Beijing but is highly unlikely to bring its policy in line with European preferences; and any other way to leverage military power, for example in the form of enhanced military cooperation, is no political option.

While Europe can use military power as a supportive means in its relationships with the United States and China, its economic weight can be its much more impactful source of power. Especially in recent years, the EU has increasingly made use of its economic tools or designed new ones. The more strategic use of economic tools to protect European interests is, among others, visible in the EU’s response to the United States’ tariffs or the EU tariffs on Chinese electric vehicles. Furthermore, the economic toolkit of Brussels has grown in recent years, for example through the anti-coercion instrument. Although originally at least implicitly designed as part of a de-risking strategy from China, officials have repeatedly emphasised that this instrument could be used towards both Washington and Beijing.

Moving from sources of power to leverage

The key challenge for Europe is, however, to use its power in a smart way. Concretely, this implies moving from raw power — meaning capabilities that exist on paper — to relational power and the ability to influence other actors. In other words, Europe needs to be able to demonstrate to both the United States and China that its sources of power, albeit limited, can imply leverage, either in the bilateral relationship directly or more broadly on international challenges relevant to either side.

In the economic realm, the EU’s economic weight is easily translated into leverage: the United States and China were, respectively, the EU’s biggest and second biggest trade partners. Accordingly, moving from European raw power to European leverage depends on political will to mobilise its existing tools for economic statecraft like the anti-coercion instrument. Although the EU’s trade relations with both Washington and Beijing are rather characterised by tensions at the moment, the mobilisation of economic power does not necessarily imply a response to coercion or exercising pressure. On the contrary, the EU could also very well use its economic power as a factor for enhancing cooperation in certain domains, as joining forces with the EU could imply a power multiplication for others.

In the military and security realm, moving from numbers of defence spending to actual leverage is more complicated. Most importantly, Europeans are facing a collective action problem: although only the defence spending of EU countries is already slightly higher than China’s, the decentralisation of planning and especially diverging national priorities and signalling clearly impede collective European action.

While the EU Commission can speak with one voice for Europe on trade, this is not the case for security policy: the role of the Commission has certainly increased in this field, especially with regard to funding, but overall, European security policy remains mostly intergovernmental. Accordingly, it is exponentially harder for Europeans to credibly signal to Washington or Beijing that European interests need to be taken into consideration because Europeans have leverage in this realm. While Europeans could serve as a catalyst for specific actions of the United States — for example supporting US political or military objectives —, it is hard to imagine a situation where Europeans manage to mobilise their power in a way that prevents either of the great powers from taking certain measures. The war in Ukraine illustrates this dilemma: European calls on China to influence Russia to end the war have led nowhere, and European suggestions to launch a “reassurance force” with a US backstop have not altered the US administration’s position on its involvement and support for Ukraine so far.

Moving forward, Europe hence needs to become more effective in mobilising its power — but also to speak the language of power. Only if underpinned by a credible demonstration how its resources affect its ability to act in international affairs, and most importantly on issues that matter to Washington and Beijing, Europe could ultimately transform power into influence.