Chinese officials and businesses are seeking a settlement with the EU amid Donald Trump’s trade war, but the bloc is deeply skeptical that it will become a dumping ground for goods diverted from the US.
Beijing aims to deepen its ties with the world’s largest trade zone in the hopes of finding alternative markets for goods in the face of sudden US tariffs. China has dispatched trade delegations to European capitals in recent weeks, with factories exploring re-routing of goods to continental markets.
EU leaders have also publicly expressed the need for greater cooperation. This contrasts with previous declarations of the need to “risk” the supply chain from Beijing.
However, the reset of EU-China ties must overcome deep differences in China’s huge trade surplus, barriers to access its own markets, and implicit support for Russia’s war in Ukraine.
“It’s time for China and Europe to start over,” said Zhang Yansheng, a senior researcher at a think tank at the state-run Chinese Academy of Macroeconomic Research.
The Trump tariff masses “give us an opportunity to rethink our trade ties. China should export more and import more to Europe,” he added.
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Trump has dramatically threatened to impose new tariffs of up to 145% on Chinese exports and cut trade flows between the two biggest economies in the world. Beijing is retaliating with its own 125% tariff.
Meanwhile, the EU is hit by 10% tariffs and could increase to 20% if it fails to meet Washington’s demands.
Trump’s chaotic maneuvering caused gusts of outreach between Beijing and Brussels as both sides seek a counterpoint against the US.
Chinese leader Xi Jinping visited Spanish Prime Minister Pedro Sanchez last week and said that China and the EU should “collaboration and resist unilateral bullying.”
While President of the European Commission, Ursula von der Leien, was a supporter of “risk,” last week Chinese Prime Minister Li Qiang said the two sides should work together to provide “stability and predictability” to the global economy.
“Both require alternative markets and stability,” said François Simmitt, an economist at the Mercator Institute at the China Institute. “Tactically, the move towards bilateral cooperation between these two economic heavyweights will expand potential leverage in any consultation with the US.”
Chinese President Xi Jinping, right, met Spanish Prime Minister Pedro Sanchez in Beijing last week © Andres Martinez Casares/AP
China’s Commerce Ministry has dispatched trade delegations to events in Stockholm, Budapest, Oslo and Hanover in the past few weeks, raising interest in investing in China, where foreign companies are calling for barriers to market access.
China – Peter Barnett, chief executive of Brittain Business Council, noted that Beijing sent a large delegation of staff and executives to a “Investment in China” event at Queen Elizabeth II Centre in London this month. “For international business, China says you are welcome and we want to do more for you,” he said.
Chinese manufacturers and exporters are also looking for products from buyers in the European market. “We are working hard to expand our business in Europe and elsewhere, and we are making progress,” said the manager of Petpal, a leading pet food manufacturer in China.
US tariffs will accelerate the “trend of Chinese companies becoming globalized,” said CTP Jaromir Cernik, a large investor in European industrial property. He added that China’s demand for European factories and warehouse space is growing.
However, European business figures familiar with Chinese delegations said that many companies were reluctant to invest in China, and that the EU government would rarely offer it. Last year, a survey of China’s EU Chamber of Commerce found that over a quarter of respondents were pessimistic about the potential for growth in China, and 44% of respondents were pessimistic about profitability.
The weakness in China’s domestic consumption has created pressure on DEFL, strengthening price competition and making it an unattractive market for foreign companies.
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No matter what detente, a considerable amount of friction must be overcome. The EU has criticized China for its alliance with Russia and its support for Moscow’s invasion of Ukraine. Belgium is investigating Huawei, the Chinese communications champion, who is said to be bribing members of the European Parliament.
XI also plans to sniff a summit showing 50 years of bilateral relations. Meanwhile, Von Der Leyen and Council of Europe President António Costa will force you to travel to Beijing for a meeting to be held in Brussels in July.
However, Chinese leaders will be attending the Victory Day parade in Moscow, marking 70 years since World War II ended.
Another long-standing tension is trade. Exports to China’s bloc have more than double the imports last year, and EU leaders have accused Beijing of cultivating industrial overpower, offsetting economic weaknesses at home, flooding continental markets with low-cost goods, and weakening home-made industries.
Von Der Leyen reiterated Trump’s concerns over the trade deficit last month, saying some countries “have an unfair advantage of current regulations.”
The EU has launched a trade defense investigation on goods ranging from electric vehicles to plywood, some of which have resulted in more than 100% tariffs. Beijing fought back with probes targeting EU pork, cognac and dairy products.
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“The relationship between Europe and Beijing is handing out new lowest due to increased trade imbalances, China’s support for Russia, and increased Chinese cyberattacks across Europe.” “Given this background, it’s difficult to imagine a kind of détente between Brussels and Beijing.”
However, if trade talks with the US fail to mediate a reprieve from tariffs, the EU can “deem even a bad deal with Beijing better than a two-cost trade war with both the US and China,” Birkin added.
Von Der Leyen recently told the Financial Times that the EU would “take a safeguard” against dumping, adding that Li had pledged to support domestic consumption and take steps to absorb excess production.
China and the EU have also agreed to strengthen high-level dialogue and negotiations to resolve China’s EV taxation.
Beijing can rely on German companies that have important footprints in China to support their close ties. A policy paper distributed this week amongst the German corporate representatives of China called on the next government in Berlin to “play a more active role” in supporting domestic business interests.
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Freight prices refer to the initial indication of trade sorting. The Ningbo Containerized Freight Index showed that prices to the US West Coast plummeted 18% from the previous week until April 11th, while prices in the Mediterranean rose 15%.
Chang of the Academy of Macroeconomic Research said there was a “big misunderstanding” between China and the EU last year, and that the delegation he attended received a cool reception.
“[Europeans] They wanted “relaxing” from China’s industry and supply chain, as they viewed China from a biased perspective.
“China and Europe need to rearrange each other,” he said.
Additional reports by Beijing’s Nian Liu and Wensey Ding by Florian Muller of London. Data visualization with Haohsiang Ko in Hong Kong
