Chinese officials and businesses are pursuing a rapprochement with the EU in light of Donald Trump’s trade war, but the bloc remains wary of becoming a destination for goods redirected from the US.
Beijing aims to strengthen ties with the world’s largest trading bloc to find new markets for its products due to hefty US tariffs. In recent weeks, China has sent trade delegations to various European capitals, and factories are considering rerouting products to European markets.
EU leaders have publicly voiced the need for increased cooperation, a stark contrast to earlier statements emphasizing the necessity to “de-risk” supply chains reliant on Beijing.
However, a reset in EU-China relations must address significant disagreements regarding China’s considerable trade surpluses, the restrictions on accessing its market, and Beijing’s implicit support for Russia’s war in Ukraine.
“It is time for China and Europe to start afresh,” said Zhang Yansheng, a senior researcher at the state-run China Academy of Macroeconomic Research.
Trump’s tariff situation “provides us with an opportunity to rethink our trade relationship—China should export more to Europe and import more as well,” he added.
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Trump has introduced new tariffs of up to 145 percent on Chinese exports, which threatens to disrupt trade between the two largest economies. In response, Beijing has enacted 125 percent tariffs.
Meanwhile, the EU has encountered 10 percent tariffs, with the risk of these increasing to 20 percent if negotiations fail to satisfy US demands.
Trump’s tumultuous maneuvering has sparked increased engagement between Beijing and Brussels, as both parties seek an alternative to the US influence.
Chinese leader Xi Jinping stated to visiting Spanish Prime Minister Pedro Sánchez last week that China and the EU should “jointly resist unilateral bullying.”
Even European Commission President Ursula von der Leyen, a proponent of “de-risking,” remarked to Chinese Premier Li Qiang last week that both parties should collaborate to ensure “stability and predictability” for the global economy.
“Both parties require alternative markets as well as a sense of stability,” commented François Chimits, an economist at the Mercator Institute for China Studies. “Strategically, enhancing bilateral cooperation between these two economic powerhouses could enhance their leverage in negotiations with the US.”
China’s commerce ministry has recently sent trade delegations to events in Stockholm, Budapest, Oslo, and Hanover to promote investment in China, where foreign firms have reported barriers to market entry.
Peter Burnett, CEO of the China-Britain Business Council, observed that Beijing dispatched a large delegation to recent “Invest in China” events at London’s Queen Elizabeth II Centre. “For international companies, China is signaling that you are welcome, and we want you to engage more,” he explained.
Chinese manufacturers and exporters are also targeting buyers in European markets for their products. “We’re actively working to grow our business in Europe and beyond—and we’re seeing progress,” commented a manager at Petpal, a significant Chinese pet-food producer.
The US tariffs will accelerate the tendency of Chinese firms expanding globally, remarked Jaromir Cernik at CTP, a major investor in European industrial property, adding that Chinese demand for industrial and warehouse spaces in Europe is on the rise.
However, a European business representative familiar with the Chinese delegations noted that EU governments have little to offer, as many firms hesitate to invest in China. A survey conducted by the EU Chamber of Commerce in China last year revealed that over a quarter of respondents were pessimistic about their growth prospects in China, with 44 percent doubting their profitability.
Declining domestic consumption in China has also generated deflationary pressures, increasing price competition and rendering the country a less attractive market for foreign investments.
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Any potential détente would also need to address substantial tensions. The EU has criticized China for its alliance with Russia and support for Moscow’s invasion of Ukraine. Belgium is investigating Huawei, the Chinese telecommunications giant, for allegedly bribing members of the European Parliament—an allegation the company denies.
Xi is also reportedly planning to boycott a summit commemorating 50 years of bilateral relations, while insisting that von der Leyen and European Council President António Costa travel to Beijing in July for a meeting that was originally scheduled in Brussels.
Conversely, the Chinese leader will attend a Victory Day parade in Moscow, celebrating 70 years since the conclusion of the Second World War.
China’s exports to the EU were more than double its imports last year, leading EU leaders to accuse Beijing of fostering industrial overcapacity to mask economic weaknesses at home, inundating European markets with low-cost goods and undermining local industries.
Last month, von der Leyen echoed Trump’s concerns regarding trade deficits, stating that some nations were “unfairly exploiting the current regulations.”
The EU has initiated trade defense investigations into numerous products, including electric vehicles and plywood, resulting in tariffs exceeding 100 percent in some cases. In response, Beijing has launched probes targeting EU pork, cognac, and dairy items.
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“Europe’s dealings with Beijing have reached new lows due to worsening trade imbalances, China’s backing of Russia, and an increase in Chinese cyberattacks throughout Europe,” stated Noah Barkin from the Rhodium Group consultancy. “Given this context, envisioning a détente between Brussels and Beijing is challenging.”
However, if trade discussions with the US fail to yield any relief from tariffs, the EU “might consider that even a subpar agreement with Beijing is preferable to fighting a two-front trade war involving both the US and China,” added Barkin.
Von der Leyen recently informed the Financial Times that the EU would implement “safeguards” against dumping, noting that Li had pledged to take measures to enhance domestic consumption and absorb excess production.
China and the EU have also agreed to intensify high-level conversations and negotiations to resolve tariffs on Chinese electric vehicles.
Beijing can rely on some German companies with substantial operations in China to advocate for closer ties. A policy paper circulated among German corporate representatives in China this week urged the incoming Berlin government to “take a more proactive stance” in supporting their business interests within the country.
Freight rates indicate early signs of a trade realignment. The Ningbo Containerised Freight index reported that shipping costs to the US west coast fell by 18 percent for the week ending April 11, while prices to the Mediterranean increased by 15 percent.
Zhang at the Academy of Macroeconomic Research suggested there was a “significant misunderstanding” between China and the EU last year, remarking that a delegation he was part of faced a lukewarm reception.
“[Europeans] have viewed China from a biased angle; they desired ‘de-risking’ from China’s industrial and supply chains,” he stated, while acknowledging that the Chinese side was also “flexing our muscles too much.”
“China and Europe need to re-evaluate their understanding of one another,” he remarked.
Additional reporting by Nian Liu and Wenjie Ding in Beijing and Florian Müller in London. Data visualization by Haohsiang Ko in Hong Kong.
