Hungary for trouble: Why Orbán must inevitably choose between the US and China

Euractiv

a day ago

Viktor Orbán and Donald Trump share many similarities: both are virulently anti-immigrant; both love Russia; both are suspicious of Ukraine; and both purport to defend 'traditional values' against 'globalist elites', 'woke culture', and the liberal 'virus'.
One critical area where the Hungarian leader and his American counterpart sharply disagree, however, is China. Indeed, the fundamental irreconcilability of their attitudes towards Beijing could soon spark a falling out between the two 'good friends' every bit as explosive as the recent bust-up between Trump and former 'first buddy' Elon Musk.
Since regaining his country's premiership in 2010, Orbán has worked assiduously to boost economic and trade ties with Beijing, welcoming investments by Chinese electric vehicle makers, battery manufacturers, and telecommunication firms.
Trump, by contrast, has accused the world's second-largest economy of 'raping' America and is currently wielding Washington's economic and military clout to pressure its trading partners to cut China from their supply chains.
These key differences, which mostly simmered beneath the political surface during Trump's first term, are increasingly boiling over into the public sphere.
In April, America's top envoy to Budapest warned the Central European country about the 'strategic challenge' posed by China to the West, and urged Hungary to preserve 'control over [its] own future'.
Later that month, Donald Trump Jr, the US president's eldest son, similarly called on Hungarian business leaders to sever ties with China so as not to leave Washington 'economically vulnerable to countries that are not our allies'.
Rather than buckling to US pressure, however, Budapest has doubled down. Just days after Trump Jr's visit, the country's economy minister said Hungary doesn't 'see an investment potential from the US that would be on par with China'.
In mid-May, its deputy trade minister also stressed that Hungary's relations with China are a 'red line' that Budapest will 'definitely not' cross to avoid Trump's sweeping tariffs on EU exports, which could rise to 30% from 1 August.
The remarks came just days after China had vociferously condemned the UK's own trade deal with Washington. 'Cooperation between states should not be conducted against or to the detriment of the interests of third parties,' Beijing warned. A perplexing poll But this presents a puzzle. If ties between Washington and Budapest are becoming increasingly fractious, why was Hungary the only one of the EU's 27 member states to vote against the European Commission's proposed €93 billion retaliatory package on US goods this week, which will enter into force on August 7 if no deal is agreed?
Similarly, why was Hungary the only EU country to oppose a previous €21 billion list in April, which was later suspended and merged with a second list to create this week's larger package? If Budapest has, in fact, opted to side with Beijing rather than Washington, shouldn't it support retaliation against the US?
Although no official explanation for its vote was forthcoming, Hungarian officials have previously argued that retaliating – or even threatening to retaliate – against Trump will only 'provoke' the self-proclaimed 'Tariff Man' into imposing even harsher levies on Europe.
While such concerns should certainly not be dismissed, they cannot plausibly explain Budapest's vote. Other export-oriented EU countries are just as worried (if not more worried) about the risks of escalation; yet they note, correctly, that such concerns must be balanced against the risks of looking weak – and, hence, inviting further US duties.
Furthermore, Budapest's reluctance to retaliate is flatly contradicted by its own call earlier this month for the Commission, which oversees EU trade policy, to 'reciprocate' Washington's own 'aggressive' negotiating tactics.
In fact, Hungary's vote is most likely a desperate attempt to thread the geopolitical needle by appeasing Beijing and Washington – and angering Brussels – in one fell swoop.
First, the vote signals to Beijing that Budapest does not support Brussels' negotiations with Washington, which will likely lead to the EU's imposition of restrictions on Chinese exports and investment into Europe.
Second, by opposing retaliation, Hungary is hoping to earn geopolitical capital from Washington that it could subsequently 'cash in' by maintaining close trade and economic ties with Beijing, without triggering condemnation from the US.
Third, and more broadly, the vote also signals Hungary's distaste for Commission chief Ursula von der Leyen's increasingly anti-China rhetoric, which was on full display during the profoundly underwhelming EU-China summit in Beijing earlier this week. A geopolitical tragedy Unfortunately, the circle simply cannot be squared. Hungary, a country of just 10 million people who account for just over 1% of the EU's total economic output, is ultimately powerless to prevent the inexorable fracturing of the global economy, which is driven by geopolitical forces – in particular the US-China rivalry – far beyond its control.
Furthermore, Budapest is similarly incapable of altering the EU's political, financial, and (especially) military dependence on the US – and, conversely, China's growing reliance on Russia – that will almost inevitably force the bloc to hitch itself to Washington over the coming decades.
Such a scenario has a certain ring of tragedy about it. Indeed, like any great tragedy, Hungary itself appears acutely aware of its fate.
'The United States is imposing a new tariff – or world trade – reality,' Deputy Trade Minister Levente Magyar said earlier this month. 'What we can do is make the best of it.'
Sadly, Hungary won't be able to make much of it at all.
Economy News Roundup
Europe to forge 'pragmatic' ties with China. Ursula von der Leyen said on Thursday that Brussels will seek to 'rebalance' its economic relationship with Beijing and pressure the world's second-largest economy to end its war in Ukraine. Speaking to reporters following an EU-China summit in Beijing, von der Leyen added that the issue of Chinese 'overcapacities' has become 'even more urgent' in the context of Donald Trump's sweeping tariffs, which have alarmed European exporters and sparked fears of cheap Chinese products being redirected and dumped on Europe. Read more.
The European Central Bank (ECB) holds interest rates at the same level for the first time in more than a year. Thursday's move, which comes amid persistent concerns about the impact of US tariffs on eurozone growth and the inflation outlook, means the ECB's key interest rate remains at 2%: half the record high of 4% reached in 2023 and held for much of 2024. 'We are in this 'wait and watch' situation,' ECB President Christine Lagarde told reporters, adding that 'the jury is out as to how quickly the uncertainty will be cleared under present circumstances'. Read more.
Economic activity across the eurozone grows to the highest levels in almost a year. The eurozone's provisional composite Purchasing Managers' Index (PMI), which measures overall activity in manufacturing and services across the single currency area, rose from 50.6 to 51.0 between June and July – an eleven-month high that pushed the index further above the 50-point mark separating growth from contraction. 'The eurozone economy appears to be gradually regaining momentum,' said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank (HCOB), which compiles the index together with S&P Global. Read more.
EU hopeful that Trump will greenlight Japan-style trade deal. EU diplomats believe that the US president will approve an agreement before his threatened 30% blanket levy on EU goods enters into force on 1 August. The deal would largely mirror the one Washington struck with Tokyo earlier this week, which left a 15% tariff in place on cars and most other goods. Olof Gill, EU Commission spokesperson for trade, told reporters on Thursday that a deal with Washington is now "within reach".
EU countries approve €93 billion US counterpunch. The list comprises two previously separate packages that Brussels merged on Wednesday to make its US countermeasures 'clearer, simpler, and stronger', as the bloc races to strike an agreement with Washington before Trump's 30% tariff on EU goods enters into force. All member states except for Hungary voted in favour of the package, which would hit a wide range of American goods, including aircraft, cars, wine, and medical and electrical equipment. The duties will enter into effect on 7 August if no deal with Washington is agreed. Read more.
Germany urges Brussels to threaten 'trade bazooka' on Washington. 'As we are now in the final phase of negotiations, the right time has come from the perspective of the German government for the Commission to consider the use of this anti-coercion instrument (ACI),' a senior German government official said on Wednesday. The move marked a sharp escalation of the EU-US trade war and a stunning reversal of Berlin's previous call for a 'quick and simple' deal with Washington. The ACI – the EU's most powerful trade weapon – would legally empower the Commission to impose a wide range of retaliatory measures on Washington, including investment restrictions, the withdrawal of intellectual property protections, and tariffs on goods as well as services. Read more.
(ow)