Transatlantic approaches to China should be guided by three Ds: deconflict, disentangle, and deny. First, the US and EU should deconflict their own bilateral ties so they do not endanger transatlantic cooperation on China. Second, they should disentangle their economies from uncomfortable dependencies on China. Third, they should deny critical technologies, data, or goods to China that could advance Beijing’s military capabilities and revisionist goals.    

To deal better with China, the transatlantic partners need to deal better with each other. Washington and Brussels can take an important first step by agreeing that they each have a common interest in deconflicting their own bilateral disputes to address the China Challenge. This does not mean ignoring bilateral problems; it means embedding them within a broader narrative of what unites, rather than what divides, the two sides of the North Atlantic.   

On the European side, a transatlantic deal could include commitments to boost defense spending to 3% or more of gross domestic product; bolster support for Ukraine; diversify further from Russian energy; buy more US-produced liquified natural gas, agricultural products, and defense equipment; and refrain from levying unilateral digital services taxes on US firms.  

On the US side, the deal could include commitments to maintain an active role in NATO, ensure Ukrainian security and sovereignty, refrain from imposing preemptive tariffs, and explore effective global tax reform arrangements. Both parties could forge an agreement to promote critical minerals security, identify specific areas of alignment toward China, and enlist like-minded countries.  

Washington and Brussels have an interest in creating a process to manage bilateral issues so they can focus on the real challenge: China. The current US and European Union (EU) mechanism, the Trade and Technology Council (TTC), has proven to be unwieldy, with 10 working groups. Many disputes have been shelved, not resolved. The TTC has also been unable to focus transatlantic efforts on the China Challenge.  

We propose a successor mechanism that would replace the 10 working groups with three pillars. Pillar One would focus on mitigating US-EU disputes and advancing bilateral cooperation. Pillar Two would comprise measures the two parties could advance directly to address China. Pillar Three would include areas in which the US and EU could address China-related issues by working with like-minded partners.   

Pillar One: Manage Bilateral Conflicts

• Strike a quick trade deal. In 2018, President Donald Trump and European Commission President Jean-Claude Juncker avoided an all-out trade war by agreeing to “work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods” and to “reduce barriers and increase trade in services, chemicals, pharmaceuticals, medical products, as well as soybeans.” Juncker announced plans to buy more US liquefied natural gas; Trump put aside his threat to impose tariffs on European cars. The two parties have an opportunity to revive and extend this arrangement.  
• End the steel and aluminum war. Resolving the transatlantic standoff over steel and aluminum would align the two partners on China. An agreement promises to tackle global market distortions by nonmarket economies while addressing global emissions.  

• Conclude critical minerals agreements. Deals would boost mineral production and processing critical to many US and European industries that are largely controlled by China. Building trusted and secure minerals supply chains with high standards is essential to competing with and reducing dependencies on China. Current negotiations are stuck, in part because the US Congress, which has statutory authority over trade, has not been involved. Congress and the White House should now work together to specify negotiating objectives. The EU and United Kingdom (UK) are interested in finalizing these agreements in large part because they could enable all critical minerals listed in the US Inflation Reduction Act (IRA), that are extracted or processed in the EU or UK to count toward IRA tax credits. Although the future of these tax credits under the Trump administration and a Republican-majority Congress is unclear, each side of the Atlantic has an interest in promoting secure critical minerals supplies.   
• Expand US-EU mutual recognition. An updated and expanded agreement would increase the number of EU-located certification bodies that can certify for US standards and enable US-located certification bodies to certify for EU standards. This would reduce costs without lowering standards, bolstering transatlantic trade while reducing each party’s reliance on imports from China. Optimally, the deal would extend to the UK as well as to the European Free Trade Association countries of Iceland, Liechtenstein, Norway, and Switzerland.  
  
  The existing 1998 standards deal covers various sectors, including telecommunications equipment, pharmaceutical products, and medical devices. An expanded agreement should include as many product categories and sectors as possible, with a priority on machinery, electrical equipment, clean tech, artificial intelligence, and cybersecurity. An arrangement that reduces trade costs by 6% is estimated to grow EU exports to the US by $42.2 billion and US exports to the EU by $32.5 billion while reducing Chinese exports to the EU and US by $19.4 billion. Unlike many policy interventions, this agreement does not entail any direct financial burden on taxpayers.  
• Improve transatlantic risk assessment. The EU and US have each conducted supply chain vulnerability assessments and have identified roughly similar sectors of high dependencies on China. A joint assessment could sharpen each party’s understanding of common supply-chain risks, enabling the allies to avoid overcapacity or duplicative investments. Such an initiative should be expanded to encompass Group of Seven (G7) partners and include ongoing dialogue with the private sector on assessments of China-related geopolitical risk.  
• Be standard-makers, not standard-takers. The allies should harmonize standards based on International Organization for Standardization, International Telecommunication Union, and International Electrotechnical Commission standards, both for emerging technologies such as artificial intelligence (AI) and for a wide range of industrial products, including machinery and electrical equipment. Transatlantic digital trade should be facilitated through alignment on technical standards such as cybersecurity certification. 
• Ensure that new EU laws do not privilege Chinese and Russian companies. The EU’s Digital Markets Act (DMA) compels major US “gatekeepers” to offer additional choices for consumers. Many large Chinese and Russian companies, such as Alibaba, Tencent, Huawei, Baidu, and Yandex, are exempt. US companies are required to open their platforms to competitors, which forced Android to offer Yandex as a search option, even though Yandex sends user metadata to servers based in Russia. Chinese companies also stand to benefit. Without effective intellectual property and security safeguards, the DMA’s data disclosure obligations could expose sensitive European and US data, intellectual property, and trade secrets to state-sponsored Chinese and Russian companies.  

• Promote defense-related innovation. NATO’s Article 2 commits allies to promote “conditions of stability and well-being,” “eliminate conflict in their international economic policies,” and “encourage economic collaboration between any or all of them.” Allies have never made full use of Article 2. The alliance’s Resilience Committee could be tasked with generating formal information-sharing mechanisms, facilitating cooperative arrangements, and devising common standards. 

NATO should explore several additional steps:  

• Build resilience. Chinese and Russian actors are audaciously targeting the connective sinews of free societies. Moscow weaponizes flows of people, information, food, and energy. Beijing manipulates flows of information and instrumentalizes flows of goods and critical materials to coerce others into abandoning actions deemed contrary to Chinese interests. Actors from both states are interfering in the electoral processes of NATO’s democracies. Russian and Chinese intruders have infiltrated the classified networks of the Pentagon; allied militaries; and defense, finance, and foreign affairs ministries. They have implanted pre-positioned malware in nuclear plants, power grids, port cranes, and water systems—lurking time bombs that they could activate at a time of their choosing. China has installed malware in US infrastructure from energy grids to port cranes, and appears to be complicit in some undersea sabotage. Allies must move beyond country-by-country resilience metrics and adopt shared approaches that protect critical services from disruption.  
• Scrutinize and limit Chinese investments in ports. Chinese state-owned enterprises control an estimated 10% of all European port throughput and have a direct presence in at least 15 European ports important to NATO military mobility. Nine European ports feed real-time location status, logistics activities, and other data into LOGINK, a centralized information platform run by a Chinese government agency. Such activities likely run afoul of the EU’s General Data Protection Regulation. The US 2024 National Defense Authorization Act prohibited the Department of Defense from entering into contracts with any port that provides data to LOGINK, yet the issue has not been resolved.   
• Establish a Centre of Excellence in the Indo-Pacific. Much like current centers in Helsinki and Bucharest, a new Asian outpost need not be a formal NATO entity; it could be open to participation by a host of actors, including the private sector.  
• Designate select NATO allies as “excepted foreign states,” which means that entities from those allied countries that intend to invest in the United States are subject to less scrutiny than others. Until now, the Committee on Foreign Investment in the United States (CFIUS), the US investment review committee, has designated only the members of the Five Eyes intelligence-sharing program — Australia, Canada, New Zealand, and the UK — as “excepted foreign states.”  

Pillar Two: Address the China Challenge  

• Extend sanctions on China. Washington has taken initial steps to blacklist Chinese individuals and companies who are enabling Russia’s aggression in Ukraine. The EU’s 15th sanctions package against Russia for the first time targets complicit Chinese companies and individuals with visa bans and asset freezes. While these steps are welcome, the transatlantic partners should expand their respective efforts and coordinate with other like-minded countries.
• Expand export control coordination. The United States and Europe can better use export controls to stem the flow of national security-relevant technologies to China. The parties have agreed to control 50 high-priority items sought by Russia for its war in Ukraine, and these include sanctioned Chinese actors enabling Russia’s aggression. Together with Asian partners, they should identify similar lists related to China. One model is the Coordinating Committee for Multilateral Export Controls during the Cold War. Another potential model is the US-Japanese-Dutch deal to control advanced semiconductor manufacturing equipment to China, even though that arrangement continues to face problems.  
• Align on data flows. In 2023, the US executive branch and Congress took steps to control certain kinds of data flows to China, Russia, and other “countries of concern” for national security reasons. While European countries have set up regimes that limit data transfers, national security restrictions remain the purview of the member states of the European Union. The transatlantic partners should address ways to coordinate such national security limitations on data flows.  
• Coordinate on nonmarket policies impacting digital trade. In May 2023, the allies agreed to exchange information on their respective policies linked to risks stemming from digital firms from nonmarket economies, but such efforts have languished. They should be revived.

• Improve inbound investment screening. The US and Europe share security concerns about some inbound investments from China. A US-EU group aims to coordinate its respective inbound investment screening mechanisms, but this work is complicated because investment screening is the responsibility of EU member states.  
  
  The European Commission has proposed improving and harmonizing these disparate screening procedures, although considerable differences among member states have yet to be resolved. Inbound investment screening mechanisms have also been adopted by many other key partners, including Australia, India, Israel, Japan, New Zealand, the Philippines, South Korea, and Taiwan. While this greater vigilance is welcome, national efforts are largely uncoordinated and governed by divergent criteria that can generate gaps in coverage and enforcement that Beijing could exploit. For instance, the Commission’s proposed regulation would include greenfield investments, while the US CFIUS process does not. Washington and Brussels should seek coordination, information sharing, and alignment on standards and coverage, together and via an expanded G7+ framework. NATO may have a role to play. 
• Align on outbound investment screening. The US and Europe share concerns that outbound investments in China, particularly in advanced technology sectors, could generate security risks. A new 2025 US Outbound Investment Security Program, the so-called Final Rule, enjoys bipartisan support and is likely to remain in effect, or potentially expanded, during the Trump administration. The Final Rule restricts outbound investments in China, Hong Kong, and Macau for four technologies — semiconductors, microelectronics, quantum information, and AI systems — and requires industries to assess whether specific transactions may be covered by those limits.  
  
  The EU is working at a slower pace on its own outbound screening mechanism for similar sectors. Member states are currently monitoring outbound investments for one year, and European efforts are likely to be a patchwork for some time. The EU also tends to eschew country-specific targeting and so is unlikely to single out China — unless the bloc decides to abandon its so-called country agnosticism, as it has done with Russia. The transatlantic partners should seek to inform each other and, where possible, align their efforts with each other, and with partners such as the UK, Canada, Australia, Japan, and South Korea.  

Pillar Three: Work With Like-Minded Partners  

• Strengthen and expand transatlantic work on critical minerals. The Minerals Security Partnership includes the United States, the EU, and 13 additional countries. Members are exploring ways to support minerals projects around the world to alleviate dependencies on China, both by diversifying production and refining sources, and by promoting high standards in the mining, processing, and recycling sectors that are difficult for Chinese firms to meet. The Minerals Investment Network for Vital Energy Security and Transition is a public-private partnership to build a private sector network to stimulate critical minerals investments. These initiatives, while promising, have been making slow progress. They should be revitalized by reaching out to additional public and private sector actors, particularly in mineral-rich countries. 

• Counter Chinese theft of intellectual property. China is the world’s leading violator of intellectual property rights, which are critical to the innovation that drives the US and European economies. The US, EU, and UK each act individually to counter these Chinese activities. They can be more effective by sharing their knowledge and analysis of China’s threats to intellectual property, and by working together to strengthen intellectual property regimes in countries like Mexico, Vietnam, Indonesia, and India.  
• Support trusted digital vendors. The US and EU have made progress in recent years in promoting the use of trusted vendors in telecommunications. They should extend that support to the provision of subsea and fiber optic cables and the development of fifth- and sixth-generation networks, both in their own home jurisdictions and in third countries, while working to prevent untrusted vendors from accessing those networks.  
• Revive and expand US-EU-Japanese talks. The 2018 Trump-Juncker deal included an agreement to “work closely together with like-minded partners to reform the WTO [World Trade Organization] and to address unfair trading practices, including intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state-owned enterprises, and overcapacity.” The US, EU, and Japan also joined forces to address Beijing’s nonmarket practices. During the Joe Biden administration, the G7 focused on China. An expanded group that includes countries such as Australia, South Korea, and Norway could adopt a coordinated messaging campaign on Chinese practices and how they cause harm. The goal should be to press China to acknowledge that it is now a middle-income economy and should no longer be accorded preferential treatment in international agreements by claiming it is a “developing country.”  
• Promote secure and resilient connectivity. The security of critical flows of goods, services, energy, food, medicine, and digital connections is increasingly threatened by the fragmentation of the global trading system and by risks to global sea lines of communication. Given efforts by Chinese and other actors to disrupt these vital flows, securing physical and digital connectivity will be critical for economic and national security.  
• Align the EU’s Global Gateway initiative with US and other initiatives, such as the Blue Dot Network and the Partnership for Global Infrastructure and Investment.  
• Strengthen and expand the Partnership for Atlantic Cooperation, a network of 42 Atlantic countries dedicated to addressing common challenges, including improved pan-Atlantic connectivity.  
• Strengthen existing initiatives to enhance maritime safety and security. The United States and its European partners should work together on naval protection through the Combined Maritime Forces, Operation Prosperity Guardian, and the European Maritime Awareness mission in the Strait of Hormuz. Such efforts should become part of a broader transatlantic connectivity agenda, be coordinated in a more structural rather than ad hoc manner, and receive appropriate resourcing.  
• Launch a “Free Road Initiative.” This could help global partners develop and diversify their connectivity options. One flagship project, the Lobito Corridor in Africa, is an essential initiative to secure the flow of critical minerals and offer minerals-rich countries alternatives to Chinese investments. With due regard to the current turbulence engulfing the Middle East, a second flagship project could be the India–Middle East–Europe Economic Corridor, which promises to secure and diversify supply chains with the Middle East and India, important trading partners for the EU and the United States.  

Author Biography

Daniel S. Hamilton chaired CEPA’s yearlong series of workshops examining the transatlantic response to the China Challenge. He is a senior nonresident fellow at the Brookings Institution and a Senior Fellow at the Foreign Policy Institute of Johns Hopkins University School of Advanced International Studies.  

CEPA is a nonpartisan, nonprofit, public policy institution. All opinions expressed are those of the author(s) alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.