Piotr Dzierżanowski
International Economic Relations Analyst at the Polish Institute of International Affairs
No. EU-China economic ties are causing many negative effects for the European economy. With “China Shock 2.0” well under way and hitting the EU’s industry hard, we face a risk of a “Rust Belt upon Rhine.” If we allow for negative economic and social consequences akin to those the United States suffered after China’s accession to the World Trade Organization (WTO), we should expect similar political effects—rising polarization, increased populism, and an overall turn to the right. This would be yet another existential crisis for the EU.
Nevertheless, recent American actions might require diplomatic maneuvering to mitigate losses. The future of international trade—and the rules-based order more generally—is uncertain. If the West as an alliance continues to deteriorate, closer cooperation with China will be a must. For now though, it seems that any rapprochement should be tactical, aiming at leveraging the bloc’s position in the transatlantic relationship and recognizing the EU-U.S. shared interest in correcting China’s predatory economy policies.
Cecilia Malmström
Former European Commissioner for Trade, Visiting Fellow at the Peterson Institute for International Economics
While trying to find a solution to U.S. President Donald Trump’s tariffs, Europe must also intensify its trade relations with other partners, to diversify and de-risk from the United States. The European Union already has trade agreements with seventy-six countries, but ratifying the agreements with Mercosur and Mexico would be urgent. Likewise, finalizing negotiations with Indonesia, Malaysia, and Australia is an important task. The EU should also join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), where most of its friends and trading partners are already, and where much of future rules and standards will be developed.
When it comes to China, it is tricky. On the one hand, Europe trades with China and needs access to its green technology. On the other hand, Europeans have concerns when it comes to subsidies, unfair trade practices, etc. Europe is also too dependent on China when it comes to rare earth and critical minerals. Many counties worry that China will dump overcapacity products in Europe as well. But there is the frozen Comprehensive Agreement on Investment (CAI), which is suspended because of sanctions on twenty European citizens. If those were to be lifted by Beijing, I think there would be a willingness to try to ratify the agreement and thereby partly increase trade with China.
Sander Tordoir
Chief Economist at the Center for European Reform
The EU and China are both trade-surplus blocs: They rely on external demand and need buyers, not sellers, as the United States reduces its demand. China will not act as a buyer: It suffers from anemic demand and continues to rely on net exports to grow its economy. It may offer to drop tariffs on EU imports, but many of its markets are burdened by overcapacity, which means European firms cannot export profitably. The only meaningful offer China can make is to stimulate its domestic consumption.
EU exports to the United States are worth around 3 percent of GDP, and many specialized engineering widgets are hard for the United States to replace. Losing some of those exports to Trump’s tariffs poses a far smaller threat to European industry than China’s exploding exports of cars, machines, and industrial kit. This will be supercharged as China redirects its surplus to Europe because of U.S. tariffs.
Either China voluntarily restrains its exports or the EU will end up deploying trade defense instruments as safeguards. But Europe will still lose other export markets to China’s goods exports glut. Europe is caught between the hammer of Chinese overcapacity and the anvil of U.S. tariffs. The only way out for the EU is to direct demand into its own industry with industrial policy.
Zsuzsa Anna Ferenczy
Assistant Professor at the National Dong-Hwa University, Hualien, Taiwan
By imposing massive tariffs on the rest of the world, then announcing a three-month pause, while warning no one would get off the hook, U.S. President Donald Trump unleashed massive geopolitical uncertainty and economic hedging, likely away from the United States. In response, Europe paused its countermeasures and China retaliated. European Commission President Ursula von der Leyen said the bloc wanted “to give negotiations a chance,” but warned these countermeasures would kick in if talks were “not satisfactory.”
Demanding negotiations is the right European approach. Transatlantic detachment is bad for Europe and for America. Europe’s trust in the United States has been broken. Hopefully it can eventually be restored.
Rebuilding trust in EU-China ties, however, is a different story. Pretending otherwise now is naïve and dangerous for Europe. The EU must ignore the temptation to align with China in response to Trump’s attacks. It would offer no relief; On the contrary, it would weaken Europe economically and politically. Offloading Chinese overcapacity in manufacturing through exports has already undermined Europe’s industrial base, and Beijing’s goal is to decouple Europe from the United States.
Europe must stay focused on addressing the fundamental challenges China poses, including state interference in the market—ironically a shared transatlantic concern. A return to alignment on China is both in Europe’s and America’s interest.
Georgios Papakonstantinou
Acting Director of the Florence School of Transnational Governance at the European University Institute, former Greek Finance Minister and Minister of Energy, Environment and Climate Change
Back in the day, before the Trump 2.0 assault on the global order—and U.S. domestic affairs—and faced with a bipartisan American strategy of decoupling from China, the EU developed its own response: “de-risking” rather than decoupling. In other words, a noble attempt to navigate a middle ground, to mitigate risks, and limit strategic dependencies in a relationship that sees China as a partner, competitor, and systemic rival.
Fast-forward to the age of the United States as a global predator; In an incredible turn of events, Europe’s de-risking strategy is now as much about the United States as it is about China. In this world, tough as it may be when the new U.S. president demands absolute allegiance, Europe now has no option than to get closer to China.
It can start with the win-win policy areas: The EU and China leading a global coalition of the willing to save the planet from climate change. Europe should also continue with the tougher areas of trade, finance, data, critical minerals, and AI. In these areas, negotiations can find a middle ground that maintains non-predatory economic interdependence and agrees on shared global governance norms, while accepting fundamentally differing preferences and value systems.
Maaike Okano-Heijmans
Program lead for Geopolitics of Technology and Digitalization at Clingendael Institute
Closer ties with China will not solve Europe’s problems with U.S. President Donald Trump. The EU and its member states need to engage Beijing on a range of issues, starting with preventing the dumping of cheap goods due to U.S. tariffs. But today’s woes do not alter the long-term systemic challenge that China poses to Europe.
Artificially cheap products—from automobiles to solar panels and humanoid robots—challenge traditional and strategically important European industries.
Should Europeans table the possibility of lifting certain high-tech export restrictions, specifically for ASML’s advanced deep ultraviolet chip machines? Doing so will please Beijing and send a message to Washington that Europe may no longer follow the United States in every step of its technological rivalry with China. But this is a risky strategy that is unlikely to ease China’s self-reliance drive.
If today’s crisis is to be turned into an opportunity that serves Europe’s long-term interest, the best path forward is for the EU to invest in its own competitiveness, especially on critical and emerging technologies, while it positions itself as the flagbearer of multilateralism from which the United States retreats.
Collaboration with partners like Japan, South Korea, and India is crucial to show countries in the Global South that alternatives to the United States and to China are real.
Noah Barkin
Senior Advisor with Rhodium Group’s China practice
Trump’s trade war has not made Europe’s problems with China any smaller; In fact, it has exponentially grown the risk of Chinese overcapacities flooding into Europe. The silver lining is that these tariffs, and the ninety-day reprieve granted to the EU and other countries, have increased Europe’s leverage with China.
Europe should use this leverage in the run-up to an EU-China summit scheduled for July to press Beijing for a rebalancing of the economic relationship. The offer is simple: The EU market will only remain open to Chinese green technology products—from electric vehicles and batteries to wind turbines—if China agrees to restrict its exports and invest massively in European production.
These investments must meet European conditions on the transfer of technology and know-how, the creation of local jobs, and the respect of data and cybersecurity criteria.
If Beijing does not agree to these conditions, the EU should follow the U.S. lead in closing down to Chinese exports.
If China is willing to satisfy EU demands—a very big if—then the EU-China economic relationship can grow closer. If not, then Europe will need to focus on protecting its industry. The worst course for Europe right now would be to weaken its demands on China because of Trump.
