“In an era defined by escalating geopolitical tensions and the weaponization of supply chains, a counterintuitive phenomenon is taking root in the industrial heartlands of China, the United States and Europe”, writes Bob Savic, head of international trade at the Global Policy Institute in London and Visiting Professor of International Relations at the University of Nottingham. “While governments in Beijing, Washington and Brussels engage in high-stakes chess matches of tariffs, export controls, sanctions and investment screening mechanisms, a parallel universe of corporate deal-making is flourishing. The prevailing logic among multinational executives is that state-level divergence does not necessitate commercial divorce. Instead, Chinese and Western manufacturing companies are increasingly aligning their interests through complex joint ventures and strategic production alliances, not in spite of government friction but as a direct hedge against it.
This corporate pragmatism could transform joint ventures from mere tools of market access into sophisticated risk-mitigation vehicles designed to bypass trade barriers, localize supply chains and secure a foothold in multiple regulatory blocs at the same time. The most compelling evidence of this trend is the strategic realignment in the automotive sector, particularly in the new energy vehicle (NEV) space. The recent announcement by Geely Automobile Holdings and Ford Motor Company serves as a case study. By agreeing to produce NEVs for the European market at Ford’s manufacturing plant in Valencia, Spain, both companies are executing a masterstroke of geopolitical arbitrage.
By using Ford’s existing Spanish capacity, Geely gains a “Made in Europe” badge, avoiding punitive tariffs and leveraging the European Union’s supply chain connectivity without the long delay of building a greenfield factory. For Ford, which has struggled to make its European operations profitable amid high labor costs and the transition to electrification, the partnership gives it access to Geely’s advanced battery and modular electric vehicle (EV) architecture. This is not a zero-sum game. It is a symbiotic alignment where both parties sacrifice short-term competitive advantage for long-term survival in a protected market, effectively neutralizing the tariff weapons their governments are brandishing.
This model extends far beyond the Geely-Ford partnership. In the battery sector, a critical arena of U.S.-China competition, Contemporary Amperex Technology (CATL), the world’s dominant EV battery maker, has pivoted from exporting cells to licensing its production technology. Its partnership with Ford to build a battery plant in Michigan represents a new template. Instead of a direct investment that would trigger U.S. national security reviews under the Foreign Investment Risk Review Modernization Act, CATL is providing technical expertise and proprietary manufacturing processes while Ford owns the facility.
The chemical and pharmaceutical industries provide further evidence of this alignment. In the face of U.S. and EU efforts to reduce reliance on active pharmaceutical ingredients from China, firms such as WuXi AppTec have not retreated but have deepened their partnerships with Western biotech firms. In the chemical sector, Germany’s BASF is doubling down on its massive Verbund sites in China, such as its Zhanjiang project. At the same time, it is forming joint ventures with Chinese petrochemical firms to export products to Europe.
The alignment is simple. Western firms gain access to China’s industrial ecosystem and lower energy costs, while Chinese partners acquire Western environmental, safety and quality standards that enable them to compete globally. What drives this paradoxical corporate alignment is the fragmentation of global governance. Governments are creating a mosaic of regulations and barriers – including the U.S. Chips Act and national security-centered tariffs, the EU Critical Raw Materials Act and China’s domestic substitution policies – all of which effectively penalize pure imports while rewarding localized production. Joint ventures emerge as the most efficient tool to navigate this mosaic. They also allow companies to separate legal entities that can qualify for multiple sets of incentives simultaneously.
Even so, this strategic alignment is fragile and conditional. It depends on the ability of joint ventures to maintain a firebreak from their home governments. As investment screening intensifies with the EU’s Foreign Subsidies Regulation and the Committee on Foreign Investment in the United States expanding its purview, even innocuous collaborations are scrutinized. Western partners face domestic political backlash for aiding Chinese competitors, while Chinese partners risk regulatory disapproval for ceding technological advantages. The current wave of Sino-Western manufacturing joint ventures represents a sophisticated corporate response to the failure of the multilateral trading system. As governments diverge ideologically and regulatory, corporations are converging operationally to restore predictability to their investment horizons. They are effectively building a third space of production: factories that are Chinese in technology, Western in management and local in legal registration,” Bob Savic writes in the South China Morning Post.
