The United States, China, and Europe Confront an Industrial Transformation None of Them Controls
“The great powers established the rules of global trade. Now they are debating which ones should change because the results no longer align with their interests.”
I. THE SHOCK RETURNS
China occupies a central position in the industrial transformation of the twenty-first century. Its manufacturing development encompasses electric vehicles, batteries, heavy machinery, railway systems, energy infrastructure, telecommunications, robotics, and advanced technologies. These capabilities are the result of decades of investment, technical training, research, industrial planning, and participation in international markets. Their expansion is changing the global distribution of production and creating new competitive conditions for the United States, Europe, India, and other economies. The geopolitical question is not who has the right to industrialize, but how governments will respond to a transformation that alters their relative positions.
The so-called “first China shock” was associated with China’s integration into global manufacturing supply chains, particularly after its accession to the World Trade Organization in 2001. The second involves its growing participation in technologically complex industries and strategic sectors. The consequences differ depending on the country, industry, and workers involved. Some economies receive investment, components, and new trade opportunities; others face industrial competition and the need to restructure. The phenomenon cannot be explained exclusively as a threat or as a universal benefit.
“For decades, they celebrated the industrialization of the world. Now they are carefully examining who actually became industrialized.”
II. THE UNITED STATES: THE LIMITS OF A GREAT POWER
The United States continues to play a central role in international finance, scientific research, the technology industry, and global security. It possesses significant military, productive, and commercial capabilities. However, those capabilities do not allow it to unilaterally determine the economic decisions of other major powers. Its own production depends on international supply networks, minerals, industrial equipment, and foreign markets. Competition with China reveals a fundamental characteristic of the contemporary economy: even the most powerful nations need goods, technologies, and commercial relationships they do not fully control.
Donald Trump has used tariffs, trade restrictions, and diplomatic pressure as instruments of international negotiation. These policies seek to modify competitive conditions, stimulate certain productive activities, and protect interests considered strategic. Their results, however, depend on factors beyond presidential decisions: industrial substitution capacity, domestic costs, foreign responses, and technological developments. A restriction may alter bilateral trade without necessarily reducing global production of the affected product. It may also stimulate domestic investment or shift operations to third countries.
The rivalry between Washington and Beijing began before Trump and reflects structural transformations. Their decisions must be examined through their concrete effects, distinguishing announced objectives from actual results.
“A presidential order can change the conditions of trade. It cannot order the other competitors to disappear.”
III. FRANCE AND GERMANY: EUROPE CONFRONTS ITS OWN INDUSTRY
France and Germany face a transformation in the conditions of industrial competition. Their economies possess significant manufacturing, scientific, and technological capabilities, but they must respond to the growth of Chinese production in sectors including automobiles, batteries, and industrial equipment. European discussions encompass tariffs, subsidies, investment, market access, and the protection of strategic activities. National positions do not always coincide: Germany’s trade relationships with China differ from those of France, while other member states maintain their own industrial and commercial priorities.
The European Union has instruments for investigating trade practices and imposing countervailing measures when its procedures establish the existence of harmful subsidies. It can also promote investment, research, and common industrial policies. The challenge is to distinguish legitimate competition, questionable trade practices, and structural difficulties within European industries themselves. A manufacturer may lose market share because of differences in costs, innovation, productivity, public policies, or business decisions. Attributing all those outcomes to a single cause would prevent a proper understanding of the problem.
European strategic autonomy also presents a contradiction: strengthening domestic capabilities requires substantial investment, but indiscriminately restricting trade can increase input costs and harm productive activities. Europe must decide how much to protect, what to develop, and which relationships to preserve.
“Europe wants industrial autonomy. The discussion begins when the bill arrives for what it costs to build it.”
IV. THE AUTOMOTIVE INDUSTRY: A GLOBAL COMPETITION
The automotive industry represents one of the principal arenas of this transformation. China has developed extensive production capacity in electric vehicles, batteries, and components. Europe retains important manufacturers, engineering centers, and industrial networks. The United States applies its own policies supporting domestic production and imposing trade restrictions. All three economic regions use different combinations of public investment, regulation, industrial incentives, and protective mechanisms. Competition is not taking place between a completely free market and state-directed economies, but among systems that incorporate different forms of government participation.
European countervailing duties on electric vehicles manufactured in China provide an example of this dispute. The European Commission justified the measures through investigations into subsidies, while China challenged its conclusions and their commercial consequences. These differences should be resolved through transparent procedures and verifiable evidence. At the same time, manufacturers can modify their strategies through international investment, new plants, business partnerships, and supplier reorganization. A trade barrier changes the conditions for entering a market, but it does not automatically resolve differences in productivity or technology.
European and Chinese workers, international suppliers, and consumers experience the consequences of these decisions without participating directly in government negotiations.
“Governments argue over who will manufacture the automobiles. Workers are waiting to find out where the factories will be.”
V. ARTIFICIAL INTELLIGENCE: TECHNOLOGY AND POWER
Artificial intelligence has become a central component of international technological competition. The United States, China, and Europe are developing strategies to expand their research capabilities, data processing, computing infrastructure, and industrial applications. Washington has used export controls on certain semiconductors and technologies related to advanced computing. China is promoting the development of its own components, models, and systems. Europe combines research, regulation, and programs designed to strengthen its technological capabilities. The differences are not limited to who develops better algorithms: they also involve energy, equipment, capital, knowledge, and market access.
Technological restrictions raise complex economic and political questions. A government may invoke national security concerns to limit transfers considered sensitive, while affected countries may challenge the scope and effects of those measures. There are also differences between restricting advanced processors, controlling computing infrastructure, and limiting the distribution of artificial intelligence models. Confusing these instruments leads to incorrect interpretations of their legal and technological scope.
Competition over artificial intelligence also involves universities, researchers, businesses, and workers. The concentration of resources can make it difficult for countries with less investment capacity to participate. Therefore, the international problem extends beyond the rivalry between Washington and Beijing: it also concerns who will have access to technologies capable of transforming production, education, medicine, and scientific research.
“The great powers are competing to create the best artificial intelligence. Then they will want to control who can use it, how much they must pay, and who gets the profits. They promise technology for all humanity, but they are already preparing to keep most of the business for themselves.”
VI. CHINA: INDUSTRIAL CAPACITY AND CONTRADICTIONS
China brings together manufacturing, scientific, and technological capabilities developed over several decades. Its international position encompasses an extensive trade network, logistics infrastructure, industrial enterprises, and participation in strategic sectors. However, its economy also faces demographic challenges, real estate difficulties, indebtedness, and regional development disparities. Technological expansion requires continuous investment and access to specialized knowledge, materials, and equipment. None of these conditions makes any particular economic trajectory inevitable.
Chinese industrial policy combines public and private enterprises, financing, research, infrastructure, and state planning. Its results must be analyzed sector by sector. The development of batteries, railway systems, and certain types of energy equipment does not mean China possesses identical capabilities across every technological field. Nor do foreign restrictions mean its development can be halted by a decision made abroad. Progress and difficulties depend on cumulative processes, investment, and domestic and international capabilities.
China’s commercial expansion also raises questions for its partners. Countries receiving investment need to evaluate technology transfer, employment, financial conditions, environmental impact, and dependence on suppliers. These requirements apply equally to investments originating in the United States, Europe, Russia, or India. The investor’s nationality is no substitute for evaluating contractual conditions.
“A great power can build thousands of factories. No factory grants it immunity from its own problems.”
VII. RUSSIA AND INDIA: INTERESTS THAT DO NOT FIT INTO TWO BLOCS
Russia and China maintain important economic and strategic relationships, particularly in energy, trade, and diplomatic cooperation. The war in Ukraine and Western sanctions have influenced the direction of certain Russian trade flows. However, Moscow and Beijing retain different economic structures, security interests, and priorities. Cooperation between the two countries does not mean their decisions are identical. Russia seeks to maintain its ability to act internationally, while China must manage commercial relationships with numerous economies, including those that have political differences with Moscow.
India is developing its own strategy of manufacturing expansion, technological investment, and diversification of international relationships. It cooperates with the United States, participates in multilateral mechanisms alongside China, and maintains historical ties with Russia. It also faces Chinese industrial competition and territorial disputes that influence its foreign policy. Its position demonstrates that international relationships cannot be reduced entirely to two opposing blocs. A country can cooperate with different powers on specific matters without sharing all their political positions.
For Russia and India, the economic confrontation among the United States, China, and Europe creates commercial opportunities, technological risks, and new diplomatic conditions. Both must evaluate their interests without assuming that every sector requires the same response.
“The great powers offer perfectly defined blocs. Their partners continue doing business on both sides of the divide.”
VIII. WHO WILL PAY THE BILL?
Industrial and technological confrontation is changing investment decisions, prices, jobs, and supply chains. Tariffs can protect certain productive activities, but they can also increase costs for businesses and consumers. Subsidies can accelerate investment and generate trade disputes. Technological controls can respond to security concerns while simultaneously limiting scientific or commercial exchanges. Their consequences depend on how each instrument is implemented. No economic policy should be evaluated exclusively through the statements of those promoting it.
Latin America faces this transformation from a different position than the major industrial powers. Chile participates in international markets for copper, lithium, agricultural products, services, and energy. Its commercial relationships with China, the United States, Europe, and other partners require decisions based on verifiable national interests. Trade diversification, technological development, and rigorous investment evaluation can expand its alternatives. Excessive dependence on a single buyer, supplier, or financier creates vulnerabilities, regardless of nationality.
The conflict among major economies is not a dispute whose outcome can be determined exclusively through tariffs or technological restrictions. Industrial capacity, research, education, infrastructure, and productivity will continue to play fundamental roles. Governments can modify incentives and market-access conditions, but they cannot replace the processes necessary to develop productive capabilities with declarations.
The decisive question is not which power deserves to direct world trade, but which rules will allow countries to compete, negotiate differences, and reduce the human costs of confrontation. The United States, China, Europe, Russia, and India will have to answer that question from different perspectives and interests. Other countries also have the right to participate in defining those rules.
“The great powers have spent years arguing over who will manage the global economy. Workers are still waiting for someone to explain who will manage their jobs.”
FIFTY YEARS LATER — THE TEACHERS, THE STUDENTS, AND THE INDUSTRIES THAT CHANGED HANDS
Nearly fifty years ago, major American, German, French, Japanese, and other foreign companies began relocating part of their production to China. Companies such as General Electric, Siemens, Volkswagen, and numerous multinationals found low-cost workers, an enormous market, and extraordinary opportunities for expansion. They brought factories, machinery, metallurgical processes, technology, production systems, and industrial management expertise. They sought to reduce costs, increase profits, and conquer new markets. China found something even more important: a historic opportunity to learn how to manufacture practically everything.
During the following decades, millions of Chinese workers, technicians, engineers, and managers learned to operate complex industrial facilities, control materials, manage factories, and develop products. Many received international training. The Chinese government promoted universities, technical education, research, and infrastructure. Local companies began by copying, adapting, and improving technologies until they developed their own designs, processes, and products. What initially represented a cost advantage eventually became an extraordinary accumulation of industrial knowledge. Foreign companies earned enormous profits; China built productive capabilities that subsequently began competing with them.
FIFTY YEARS LATER — THE PRINCIPAL INDUSTRIAL AND TECHNOLOGICAL STRENGTHS
SECTOR EADING COUNTRIES
Electric vehicles and batteries China
High-speed trains China
Solar energy and solar panel Manufacturing China
Shipbuilding China, South Korea, and Japan
Precision industrial machinery China, Germany, and Japan
| Industrial robotics China, Japan, Germany, and South Korea
Advanced semiconductors United States, Taiwan, South Korea, and the Netherlands
Artificial intelligence China and the United States
Space technology China, the United States, and Russia
Medicine and biotechnology China, the United States, Europe, and Russia in specific specialties
Nuclear technology China, the United States, Russia, and France
Commercial aviation The United States and Europe; China expanding
REFERENCES — INDUSTRIAL AND TECHNOLOGICAL STRENGTHS
1. United Nations Industrial Development Organization (UNIDO). Industrial Development Report 2026. Global industrial development, manufacturing capabilities, technological innovation, and international industrial competitiveness.
2. International Energy Agency (IEA). Global EV Outlook 2026. International comparisons of electric vehicle production, battery manufacturing, technological development, and global supply chains.
These positions reflect sector-specific strengths, not an absolute ranking of technological superiority.
China currently stands out for its ability to produce electric vehicles, batteries, and solar technologies on a large scale. The United States retains major strengths in artificial intelligence, space technology, and biomedicine; Germany and Japan maintain extraordinary capabilities in machinery and precision engineering; and Russia retains strategic expertise in nuclear and space technology. The difference is that China no longer participates merely as a manufacturer: it researches, designs, automates, improves, and competes internationally with its own products. Its advantage in certain industries is considerable, although it cannot rigorously be expressed as a twenty-year lead across all technologies.
“For half a century, major corporations brought their factories, machines, and knowledge to China to make more money. The Chinese learned, built their own industries, and began to compete. Now some of those business leaders are discovering, with admirable surprise, that they also taught their future competitors how to manufacture.”
CIEERRE— THE UNFORGIVABLE SIN OF HAVING LEARNED TOO MUCH
For decades, the major Western powers explained to the world the virtues of competition, free trade, and globalization. They invited China to manufacture, export, attract investment, and follow the rules of a system presented as a magnificent opportunity for everyone. China listened, learned, and built universities, ports, railroads, power plants, factories, and laboratories. Then it began producing electric vehicles, batteries, high-speed trains, industrial machinery, and technologies capable of competing internationally.
Then came the real scandal: the student began surpassing some of its teachers. And those who had spent decades preaching the virtues of competition discovered, with truly touching indignation, that competing also meant risking defeat. Now the conversation has turned to protecting industries, raising barriers, and rebuilding productive capabilities. Some measures respond to genuine economic and strategic problems; others reveal a less readily acknowledged contradiction: competition seems to be a universal virtue until its results stop favoring those who wrote the rules. China did not invent that contradiction. It simply built enough factories to expose it.
“They taught China the rules of the market and congratulated it for learning them. The problem began when they discovered that China also knew how to win.”
“Globalization was an extraordinary idea as long as factories obeyed, profits flowed back, and competitors remained in the places assigned to them.”
“For decades, they preached that the market should decide who manufactured better products. Now some governments are considering how to explain to the market that it made the wrong decision.”
“They are not troubled by the fact that China learned how to manufacture. What makes them uncomfortable is discovering that China no longer needs to ask them for instructions.”
“The second China shock is not merely that China produces too much. It is that some of those who proclaimed universal competition have still not learned how to accept their own defeats.”
Author: Mauricio Herrera Kahn
BIBLIOGRAFIA
1. World Trade Organization (WTO). Reports on world trade, trade measures, and dispute settlement mechanisms.
2. UNCTAD.World Investment Report, foreign investment statistics, and international production chains.
3.European Commission. Anti-subsidy investigation and Commission Implementing Regulation (EU) 2024/2754 concerning electric vehicles originating in China.
4. International Monetary Fund (IMF). World Economic Outlook, analysis of geoeconomic fragmentation, and prospects for the major economies.
5. Organisation for Economic Co-operation and Development (OECD). Studies on industrial policy, productivity, subsidies, and global value chains.
6. International Energy Agency (IEA). Global EV Outlook and analyses of battery supply chains.
7. United Nations Industrial Development Organization (UNIDO). International statistics on manufacturing production and development.
