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BRUSSELS – Relations between China and the EU are worsening – and could rapidly deteriorate when Donald Trump returns to the White House on Monday.
The pledge by the self-proclaimed “Tariff Man” to impose steep duties on all US imports may have prompted Brussels and Beijing to ease trade ties to limit the potential impact on their export-oriented industries.
But frictions between the EU and its second-largest trading partner show no sign of abating, amid persistent European concerns about state-subsidised Chinese exports and Beijing’s growing economic and political ties with Russia.
At a time when Europe is already confronting a host of grave economic and fiscal challenges – the crisis in German industry and the France’s exploding deficit among them –a worsening of trade ties with China is the last thing the continent needs.
Notwithstanding last night’s announcement that an EU-China summit will be held later this year, evidence of rising trade tensions has been on full display over the past week.
On Tuesday, the European Commission accused Beijing of “systematically discriminating” against EU medical device producers in bids for public contracts and warned it could retaliate by banning Chinese firms from its own public procurement market.
The allegation followed the EU executive’s decision last week to impose “definitive” (i.e. five-year) anti-dumping tariffs on Chinese mobile access equipment, which is critical for the installation of electrical and telecoms infrastructure, as well as titanium dioxide, a key ingredient in household goods like paints and plastics.
The duties were imposed on the same day that China’s Ministry of Commerce condemned the “selective enforcement” of the EU’s Foreign Subsidies Regulation (FSR): legislation that Brussels has repeatedly wielded to launch probes into state-backed Chinese firms over the past year.
The recent spat follows the EU executive’s controversial imposition of levies on Chinese electric vehicles (EVs) last year, which prompted an enraged Beijing to impose retaliatory duties on EU brandy exports.
“Without a doubt, EU-China relations are getting worse,” said Tobias Gehrke, senior policy analyst at the European Council on Foreign Relations. “And I think this is recognised by both sides,” he added.
Consumptive woes
Analysts pointed to two key sources of friction between the EU and China.
The first, they said, is Beijing’s persistent failure to address problems deriving from its state-subsidised, export-oriented industrial model.
This, they explained, has triggered a global glut of Chinese goods that has disproportionately harmed Europe’s open economy, which is currently reeling from a host of other ailments, including high energy prices, elevated interest rates, and slowing demand.
Indeed, the problem seems to be getting worse: official customs data released earlier this week showed that China’s global trade surplus grew to almost $1 trillion in 2024, with year-on-year exports to the EU up by 8.8%.
Analysts also warned that China’s own economic weakness means it is unlikely to address its industrial overcapacity in the most obvious way: by boosting domestic consumption.
They also pointed to leader Xi Jinping’s ideological opposition to European-style “welfarism”, as well as high debt levels and low per capita income, as major obstacles to sustained fiscal stimulus.
“It’s not so easy [to boost domestic demand],” said Alicia García-Herrero, senior fellow at the Bruegel think tank. “They would need to radically change their economic model.”
Russian relations
The second key issue affecting EU-China ties is China’s increasingly close political and economic ties with Russia, whose war in Ukraine will enter its fourth year in February, the analysts added.
Since Russia’s full-scale invasion of Ukraine in February 2022, total China-Russia trade has surged from $147 billion in 2021 to $244.8 billion in 2024, according to official Chinese customs data published earlier this week.
García-Herrero said that EU policymakers would be “stupid” to believe that the growing ties between Moscow and Beijing will be reversed over the coming years – although she conceded that it’s unlikely that most EU leaders still believe this is a genuine possibility.
“It’s been too long, waiting for Godot, and China has not come,” she said.
Her comments were echoed by Gehrke, who warned that Trump could force Europe to adopt Washington’s more hawkish line on Beijing in order to avoid tariffs on EU exports and remain under the US security umbrella.
The famously transactional Republican has repeatedly accused China of “stealing” US jobs and intellectual property, and condemned EU countries for failing to spend more on their own defence.
“I think Europe is so exposed to Russia’s military threat that Europeans will throw in everything with Trump,” Gehrke said. “There is no alternative to the American security umbrella at the moment, so trade issues become secondary,” she added.
An abandonment of the WTO-led order?
Analysts also broadly agreed that Europe is likely to impose additional defensive trade measures against Beijing over the coming years – especially if Trump follows through on his promise to impose 60% duties on Chinese goods, which could lead to billions of dollars worth of exports being redirected and dumped on EU markets.
But García-Herrero said such defensive EU measures were unlikely to trigger significant retaliation from Beijing.
“[China is] confronted with a very, very harsh international environment, even in some emerging economies,” she said. “They need to export to Europe”.
García-Herrero added that a potential benefit of Trump’s presidency could be that Brussels reduces its commitment to the World Trade Organisation-led trade order, long abandoned by Beijing and Washington.
“The silver lining… is that Europe, because of Trump, might get out of this straightjacket of the WTO,” she said. “It’s not that I don’t like the WTO, [but] I don’t like the fact that we are the only ones in this straightjacket.”
Other analysts, however, were slightly more sceptical about the possibility of Europe abandoning its commitment to rules-based trade.
The post The EU’s Trump-China dilemma appeared first on Energy News Beat.
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