Will US tariffs push the EU towards China? | DW News

Key Concepts:

• US Tariffs
• EU-China Trade Relations
• Trade Diversion
• Trade Surplus
• State Support/Subsidies
• Multipolar World
• EU Trade Adversaries

Impact of US Tariffs on EU-China Relations:

Initially, some politicians and analysts suggested that the EU should align with China to counter the impact of US President Trump's tariffs, given the EU's status as the world's largest single market and China's manufacturing dominance. Spanish Prime Minister Pedro Sanchez advocated for a review of EU-Beijing ties, and calls were made for an international conference between the EU and China. Chinese President Xi Jinping promoted the idea of the EU and China as key players in building a multipolar world, with Chinese officials suggesting cooperation with Beijing as a response to Washington's actions.

Trade Diversion and Increased Chinese Exports to the EU:

Following the imposition of US tariffs, Chinese shipments to the US decreased, while exports to the EU significantly increased. This surge included products like smartphones, laptops, batteries, and solar panels. The prices of some products fell sharply, while export volumes rose. EU experts suspected that China was redirecting products originally intended for the US market to Europe, a practice known as "trade diversion."

Trade Surplus and Data on Export Increases:

China maintains the largest trade surplus in history, with its trade surplus with the EU exceeding 300 billion euros in the previous year. Data from May showed substantial increases in Chinese exports to France (24%), Germany (over 20%), and Estonia (nearly 80%). Before the tariffs, China's exports to the EU were already double its imports from the EU, and this imbalance has further increased.

Challenges for European Businesses:

European businesses face the dual challenge of potential US levies and increased competition from a flood of inexpensive Chinese goods. China denies diverting trade from the US to the EU. However, the initial optimism surrounding EU-China trade relations has diminished, and mistrust has grown within the EU.

State Support and Market Competition:

The EU is concerned that Chinese companies receive state support, enabling them to overproduce at lower costs. This puts European manufacturers, who lack similar support, at a disadvantage in the market, particularly in sectors like solar panels and electric cars.

Long-Term Threat and EU's Position:

The threat from China is considered a long-term issue, and the EU's problems have been exacerbated by Trump's tariffs, which have disrupted the Western-led global trade order. China aims to capitalize on this disruption. The EU now faces two trade adversaries: China and the US.

Conclusion:

While the US tariffs initially presented an opportunity for closer EU-China relations, concerns about trade diversion, China's massive trade surplus, and state-supported competition have led to mistrust and a more adversarial stance from the EU. The EU now finds itself navigating trade tensions with both the US and China.