Scholz must get real on China

German chancellor Olaf Scholz is “clearly not happy with Brussels”, says Wolfgang Munchau. During a recent visit to China, he warned the EU not to impose tariffs on Chinese electric cars; in Brussels he criticised the EU for failing to conclude free-trade deals. His traditional corporatist view ignores geopolitical tension. But firms that simply trust their governments to protect them from geopolitics are “far more likely” to expose themselves to risks. China accounts for almost 40% of Mercedes-Benz’s sales; BASF is “betting the house” on China. “This is Germany’s subprime mortgage crisis.” Ultimately, Scholz’s “softness” on China will fail due to a “lack of allies” (China-EU and -US relations are cooling). But “geopolitical hardliners” should beware of being contemptuous of economic reasoning. The “dismantling of globalisation” and creation of “adversarial trading blocs” will cost “tens of trillions of dollars” in lost productivity and investment and lead to greater inequality and a weakening of democracy itself. Unless the geopolitical approach is accompanied by a focus on investment and innovation, the risk is of losing both the commercial and geopolitical wars. Scholz may not have thought this through, but “neither have other leaders”.