China Seeks Closer Ties with the EU Amid US Trade Tensions

In light of deteriorating relations with the United States, China is attempting to strengthen its ties with the European Union (EU). The ongoing trade war has prompted Beijing to actively seek new partnerships, particularly as its economy faces challenges.

During a recent meeting with Spanish Prime Minister Pedro Sánchez in Beijing, Chinese President Xi Jinping emphasized the importance of EU-China relations. He stated that China views the EU as a key player in a multipolar world and is committed to promoting unity, development, and a greater EU influence on the global stage.

However, this diplomatic charm offensive appears somewhat transparent. With no allies in the trade conflict with the US, China's government is under pressure to find new economic partners. Despite the overtures, the EU has responded cautiously, aware of significant economic and political differences between the two powers.

Maros Sefcovic, the EU Commissioner for Trade, articulated this cautious approach, highlighting the need to establish balanced economic relations. The EU continues to believe that substantial barriers remain for European products entering China, as evidenced in a recent position paper from the European Union Chamber of Commerce in China, which outlines various challenges European businesses face in the Chinese market.

The report indicated that numerous companies remain excluded from public tenders despite complaints lodged over the years. Furthermore, stringent regulations complicate data transfers to headquarters back in Europe, and European companies find it difficult to acquire Chinese firms--a stark contrast to the acquisition of Volvo Cars by Chinese automaker Geely in 2010.

Concerns about China's export subsidies persist, contributing to ongoing tensions. Although Chinese exports have not significantly impacted European industries as they have in the US, the EU has raised alarms about overcapacity in China due to non-market practices that undermine European competitors. Sefcovic noted the significant advantages that state support affords Chinese companies, particularly in sectors deemed strategic by the EU, including semiconductors and renewable energy.

To counter these practices, the EU has imposed tariffs on Chinese electric vehicles, which can reach as high as 35 percent, and has enacted anti-dumping duties on certain products, emphasizing the need for a self-sufficient production model within Europe.

As the EU navigates these trade challenges, it remains vigilant about potential increases in Chinese exports to Europe due to high tariffs imposed by the US, which could create a market shift. As some Chinese firms seek new markets, the EU is also eyeing potential opportunities for its businesses as competition from Chinese companies in the US diminishes.

However, amid these economic dynamics, smaller Chinese enterprises, particularly those manufacturing for online retailers, are feeling the pressure from US tariffs, prompting them to look towards Europe as a viable market. The EU has noted a significant increase in low-value shipments from China, which has raised concerns over regulatory compliance and competition distortion for European retailers.

In response, the EU is contemplating the elimination of tariff-free thresholds for low-value packages to protect its market, which may particularly affect industries struggling to differentiate their products amidst fierce competition.

Despite these tensions, the EU continues to view the US as its closest ally, distinguishing its approach from that of hardline factions within the American government. The EU's commitment to maintaining a strong relationship with the US remains evident, especially in light of substantial American investments in the EU compared to Chinese investments.

A China-EU summit is anticipated in July, where discussions will likely address these complex trade relationships. The US will be closely monitoring these developments, as American officials have warned nations against strengthening ties with China, suggesting such moves could have dire consequences.