The European Commission is currently navigating a complex and turbulent economic landscape, with a critical decision looming over whether to escalate trade tensions with China or pursue a path of improved relations with the Asian economic powerhouse. This dilemma is accentuated by the backdrop of intensifying economic rivalry not only with China but also with the United States.
A Summit Without the Chairman
Recently, Chinese President Xi Jinping declined to attend the summit commemorating the 50th anniversary of EU-China diplomatic relations, leaving Premier Li Qiang to represent China. While some may interpret this absence as a reaction to unfriendly gestures from the EU, it could also be indicative of Xi’s busy schedule. The significance of this summit is underscored by the EU’s desire for Xi’s presence, reflecting the importance both parties place on their relationship.
Despite the ordinary nature of delegation practices—where the Chinese head of government typically participates in Brussels meetings while the state head engages in summits in China—Xi’s absence sends a potent signal. With the Ministry of Foreign Affairs in Beijing remaining silent on this diplomatic snub, the EU has acknowledged that relations are facing serious challenges.
Growing Tensions: The Economic Rivalry
The foundation of the rift between Europe and China lies primarily in growing economic competition. The EU’s strategic outlook since 2019 has characterized the relationship with China as one of partnership intertwined with competition and systemic rivalry. The consequences have unfolded over several years, culminating in a series of sanctions against Chinese officials and increasing skepticism over Chinese investments.
As of 2023, the EU faces a staggering trade deficit with China, amounting to $400 billion. This economic imbalance was highlighted during the last EU-China summit, where the conversation turned to achieving more balanced trade relations. Consequently, the EU has increasingly adopted a protectionist stance, driven by a perceived loss in sectors like electric vehicles and renewable energy, where China has rapidly gained ground.
The Protectionist Measures and Their Impacts
In October 2024, the European Commission implemented an eye-catching 45.3% tariff on Chinese electric vehicles (EVs), adding to the existing 10% tariff. This move represents the largest act of trade warfare between the EU and China in a decade, cloaked in rhetoric about excess production and subsidies. Critics argue that such blatant protectionism runs counter to the EU’s professed commitment to free market principles.
Environmental advocates are also sounding alarms, warning that these tariffs could jeopardize the EU’s green initiatives. The increased cost of electric vehicles due to tariffs will likely disrupt efforts to meet carbon reduction targets by 2025. The ramifications of this move are already visible in the form of rising vehicle prices for European consumers.
In retaliation, Beijing introduced temporary anti-dumping tariffs on specific European products, such as brandy, showcasing the tit-for-tat approach that has come to define international trade relations in this context.
A Division within the EU
The recent tariff measures have unveiled a lack of consensus within the EU regarding economic actions against China. Notably, Hungarian Prime Minister Viktor Orbán’s remark on an impending “economic cold war” accentuates the discord. Various European sectors are affected differently by Chinese competition, leading to divided opinions among member states.
Voting dynamics on the tariff issue revealed significant fragmentation: while nations such as France and Italy supported punitive measures, several others abstained or opposed them altogether. This division illustrates the differing economic stakes involved, with countries like Germany, whose auto industry is notably vulnerable, expressing hesitancy towards further escalation of tensions.
The Complexities of Cooperation
While the EU grapples with protective measures, China remains a crucial partner for many member states. For example, German exports to China reached €89.9 billion in 2024, highlighting the importance of this relationship for some economies. On the diplomatic front, Germany’s automotive sector has begun exploring collaboration opportunities with Chinese firms, indicating a preference for continued engagement over confrontation.
Chinese executives are already eyeing potential production plants in Germany, reflecting an investment strategy that may reshape the landscape of European manufacturing. This stands in stark contrast to nations like France, which once embraced Chinese investments but have recently leaned toward a more critical stance.
Towards a New Strategy
As the geopolitical landscape shifts, the EU faces pressure to recalibrate its approach to China. In early 2025, European Commission President Ursula von der Leyen suggested the possibility of closer EU-China ties amidst the backdrop of heightened competition with the United States. This reflects a growing recognition that fostering a constructive relationship with China may be essential for economic stability.
Recent developments, such as lifting restrictions on contacts with Chinese officials, signal a tactical shift in Brussels. However, for this strategy to bear fruit, concrete and substantive gestures must be evident from Chinese leadership, especially in terms of economic relations.
Conclusion: The Path Forward
The European Commission stands at a pivotal crossroads. As it grapples with whether to escalate trade tensions with China or pursue a diplomatic approach, the implications of this decision reverberate across the continent. The internal divisions among EU member states further complicate these discussions, revealing a landscape that is anything but unified.
Ultimately, the trajectory of EU-China relations will hinge on the balance struck between competition and cooperation. As Brussels navigates this intricate maze, the decisions made in the coming months will undoubtedly shape the future of European economic policy. The stakes are high, and the decision to either confront or collaborate with China will have profound implications for both European economies and the global geopolitical order.