A container ship is seen at the port in Qingdao, in China's eastern Shandong province on April 15.STR/AFP/Getty Images
Beijing’s sights are set on the European Union now that Donald Trump’s punitive tariffs threaten to crush trade between the U.S. and China. The EU wants new trading partners, too, but is wary about letting in an overwhelming flood of cheap Chinese imports.
As Mr. Trump escalated his trade war with China, slapping the world’s second-biggest economy with 145-per-cent tariffs, Chinese President Xi Jinping ramped up his European charm offensive. Last week, he hosted Spanish Prime Minister Pedro Sánchez in Beijing, where each promoted a more balanced trade relationship. Mr. Xi urged the EU to embrace a “fair international trade environment and jointly resist unilateral and intimidating practices.”
Translation: What China can’t sell in the U.S., it wants to sell in the EU.
On Thursday, three days after EU trade chief Maros Sefcovic went to Washington to promote the EU’s “zero-for-zero” tariff idea, Italian Prime Minister Giorgia Meloni, the EU leader closest to Mr. Trump, is to meet with the President in Washington. A day later, back in Rome, U.S. Vice-President JD Vance is to meet with her. Their agenda is not yet known, but trade with the U.S. and China is bound to come up. Ms. Meloni denounced America’s 20-per-cent tariffs on the EU (since reduced to 10 per cent) as “mistaken and no benefit to either side.”
While it appears the EU is willing to reset its often tense and occasionally antagonistic trade, investment and intellectual property ties with China, Brussels in no way seems prepared to forge a deep alliance with Beijing, economists and strategists say. “Alliance would be too strong a word,” Carsten Nickel, a managing director of strategic consultancy Teneo in London, told The Globe and Mail. “The EU is not willing to take on China’s overcapacity. There will be a European response if it tries.”
In a note published last week, the Center for Strategic and International Studies, a Washington think tank, said the U.S. tariffs on China “may well end up generating a diversion of Chinese export goods to the European Union, which would put additional pressures on European producers and likely raise calls for a protectionist response from Brussels.”
Still, the EU and China could find ways to remove some tariff and non-tariff barriers that would be mutually beneficial, even if they do not come close to creating an open playing field. “Any talks between the EU and China don’t have to be exclusively about trade per se,” said Ian Lesser, distinguished fellow of the German Marshall Fund of the United States and executive director of its Brussels office. “It could also be about investment, intellectual property and other economic matters, even political matters. China, of course, wants to try to pry Europe away from the American sphere of influence.”
Mr. Nickel said China’s courting of the EU does not mean Mr. Xi’s government suddenly became a beacon of fair trade. “It’s so obvious that China’s change of heart is happening because it is under pressure,” he said.
Mr. Trump’s tariffs on China are among the highest ever imposed on any country in the past century. China retaliated by raising its levies on U.S. goods to 125 per cent and vowed to “fight to the end” if Mr. Trump keeps upping the ante. Since the U.S. is China’s second-biggest export market, after Southeast Asia, it wants to pivot to other regions, the EU being the richest among them.
But the EU has long considered China a strategic, economic and political rival; it opposes China’s support for Russia in its war with Ukraine, for instance, and has been critical of China’s human-rights record. The EU’s overall stand will not be dropped any time soon, analysts like Mr. Nickel and Mr. Lesser believe, even if some EU countries, such as Spain or Hungary, will try to strike their own deals.
If Mr. Trump rails against America’s enormous trade deficit with China, so does the EU, though it is usually less strident about it. Last year, the EU’s trade deficit with China was €304-billion, up from €291-billion in 2023. The European Commission, the EU’s executive arm, has called the EU-China economic relationship “critically unbalanced, both in terms of trade flows and investment.” In particular, the EU says China’s heavy subsidies for certain industries, such as electric vehicles and solar panels, gives Chinese exports an unfair advantage.
Even before Mr. Trump entered the White house for the second time, the EU ramped up tariffs on Chinese goods. Last autumn, it raised levies on Chinese EVs to as much as 43 per cent, depending on the manufacturer (because some are more heavily subsidized than others). The EU and China later agreed to study the idea of replacing the tariffs with a minimum-price scheme for imported cars.
Some EU countries have welcomed Chinese investments in factories even if those factories would put pressure on local industries. Hungary has emerged as China’s investment bridgehead to the EU. China is pumping tens of billions of euros into Hungarian battery and auto plants, allowing any products produced there to avoid EU import tariffs. One of them, CATL’s €7.3-billion battery plant in eastern Hungary, is among China’s biggest foreign investments.
Not all Chinese investments are welcome. The Italian government is trying to reduce the equity stake held by China’s state-controlled Sinochem in Italy’s Pirelli, one of the world’s biggest tire manufacturers and the exclusive supplier to Formula 1. Italy considers Pirelli a strategic asset and a national industrial treasure. Investments may become a negotiating point in any reset of EU-China economic ties. Generally speaking, China can buy EU businesses (with restrictions in sensitive industries such as defence), but the EU has no similar right in China. The EC noted that “China still remains largely closed in many important sectors.”
The U.S. has decried the EU’s dance with China. Treasury Secretary Scott Bessent compared the Spanish Prime Minister’s effort to forge closer trade relations with Beijing with “cutting your own throat.” The U.S., for its part, appears fearful of alienating the EU further.