EU swings back and forth between China and the US

In 2024, China-EU trade relations experienced a back-and-forth of EU proactive attacks and China’s restrained responses, leaving the suspense of negotiations on the electric vehicle anti-subsidy case to 2025. With Trump’s coming to power, China-EU trade relations seem to have become more confusing. Amid uncertainty, the EU is likely to follow last year’s approach and continue to take the initiative against China, but after Trump’s tariff threat, it still leaves room for relations with China, and how much room there is depends largely on Trump’s attitude and actions towards Europe.

On the one hand, there are positive signs for both China and the EU. On January 14, European Council President Costa spoke with Chinese leaders. During the call, the two sides also agreed to jointly celebrate the 50th anniversary of the establishment of diplomatic relations. According to Reuters, citing an EU official, both sides agreed that the 50th anniversary of the establishment of diplomatic relations is an opportunity to successfully hold a China-EU summit later this year. The official pointed out that although the schedule has not yet been determined, it is very likely to be held in May this year.

Three days later, European Commission Trade and Economic Security Commissioner Šefčović met with Ambassador Cai Run, head of the Chinese Mission to the European Union, and the two sides exchanged in-depth views on issues such as China-EU relations, China-EU economic and trade cooperation, and the proper handling of economic and trade differences and frictions.

On the other hand, certainty is exactly what is lacking in the current China-EU trade relations. On the same day, the European Commission released a report on China’s public procurement of medical equipment. The report stated that EU medical equipment continues to be discriminated against in China’s public procurement market. The report will provide a reference for the European Commission to assess the measures to be taken to restore a fair competition environment between China and Europe in this field. The European Commission pointed out that the EU remains committed to a constructive dialogue with China to address and eliminate these discriminatory measures. However, in the absence of an acceptable solution, the European Commission will carefully evaluate the possibility of adopting measures under the International Procurement Instrument (IPI), which may include restricting or excluding Chinese bidders in EU government contracts.

Last April, the European Commission launched an investigation under the International Procurement Instrument to investigate whether measures and practices in China’s medical equipment procurement market constitute unfair discrimination against European companies and products. Just as the first investigation launched by the EU under the Foreign Subsidies Regulation targeted Chinese companies, the first investigation launched by the European Commission under the International Procurement Tool also targeted China.

In the signal sent to the United States, the EU, on the one hand, showed that it had bargaining chips in its hands by strengthening interaction with Chinese high-level officials and warning Trump to be cautious in tariff policies, and on the other hand, it showed goodwill to Trump.

On January 29, just a few days after Trump was sworn in, Šefčović sent a signal to the United States that he was willing to join the United States to fight China. Šefčović told the European Parliament’s International Trade Committee that “we should also be ready to explore deeper EU-US cooperation on economic security – an area where both the EU and the US want to make progress, including how to address common challenges from China’s non-market policies and practices.”

When it comes to China, Šefčović said, “China is our third largest and most challenging trading partner,” “We need to be more proactive in addressing China’s structural imbalances and unfair practices, such as non-market policies that promote overcapacity,” “But at the same time, we also have the opportunity to expand trade and investment relations with China. As has always been clear, we are not seeking to decouple from China, but rather to pursue a more balanced relationship in a spirit of fairness and reciprocity.” This statement shows that the EU continues to show a tough attitude in trade with China, while trying to prevent a sharp deterioration in relations.

However, recently, while announcing tariffs on Canada, Mexico and China, Trump said he would “definitely” impose tariffs on goods from the EU and described the EU’s actions as “atrocities.”

In the face of Trump’s aggressiveness, on the one hand, a spokesperson for the European Commission said, “Our trade and investment relationship with the United States is the largest in the world. This is of great significance. Tariffs will cause unnecessary economic chaos and push up inflation. This hurts all parties.” “The EU will respond firmly to any trading partner that unfairly or arbitrarily imposes tariffs on EU goods.” At the European Leaders’ Meeting on February 3, it was also stated that the transatlantic partnership remains the most important relationship for the EU, but it also pointed out that new challenges and increasing uncertainties have emerged in the relationship, and “the EU will respond firmly if it is unfairly or arbitrarily targeted.”

But on the other hand, the EU believes that the deterioration of relations with the United States will only result in the consequences of “the mantis stalks the cicada, while the oriole is behind.” Kaya Kallas, Europe’s top diplomat, recently said that if the United States launches a trade war against Europe, “China will be the one laughing on the sidelines. We need the United States, and the United States needs us.”

In the face of Trump’s volatility and unpredictability, the EU needs to make adjustments at any time according to Trump’s dynamics. Under the threat of Trump’s tariff policy, on the one hand, the EU warned “Don’t mess with me, I will bite you too”, and on the other hand, it extended an olive branch, hoping that Trump would give the EU a break. On the one hand, the EU wants to continue to take a tough stance on trade with China, but on the other hand, it does not want to fight on two fronts. In terms of showing goodwill to the United States, on the one hand, the EU hopes to form an alliance with the United States to check and balance China, but on the other hand, it does not want to go too far in pleasing the United States and lose itself. With Trump’s coming to power, the classic problem that the EU needs to deal with, how far away from China and how close to the United States, has become more difficult.