EU-China Trade Dynamics Under Scrutiny
An article by Thorsten Benner, published in Foreign Affairs, warns of a looming full-scale trade war between the European Union and China. This conflict could pose a serious threat to key European industrial sectors, including automotive manufacturing, machinery, chemicals, pharmaceuticals, and green energy. According to the data, China's share of global production has surged from 6% in 2000 to nearly 30%, while the EU's share has dropped from 30% to 17%. In 2023, China's trade surplus with the EU reached approximately $411 billion, highlighting a significant imbalance in their economic relationship.
EU's Response to Growing Tensions
To address these challenges, the EU has already imposed tariffs on Chinese electric vehicles, ranging from 17% to 35%. France has proposed introducing tariffs of around 30%. EU leaders, with the exception of Spain, have instructed the European Commission to prepare options for countermeasures against increasing pressure from China. Germany's industrial sector is bearing a particularly heavy burden, losing an estimated 10,000 jobs each month.
Martin Herrenknecht: 'The China shock is real. And it is hitting German industry with full force.'
Benner also notes that Chinese companies received, on average, three to eight times more state support than firms in OECD countries between 2005 and 2024. This disparity significantly worsens the competitive position of European manufacturers. Jens Eskelund emphasizes that 'the EU-Beijing relationship resembles a giant container ship, 400 meters long with 24,000 containers, sailing to Europe and returning almost empty.'
Moreover, there is a risk that Beijing could cut off supplies of critical raw materials in an attempt to divide the EU, further complicating the situation for individual member states. In this context, German Chancellor Friedrich Merz has expressed readiness to take action. Benner warns that 'the only thing worse than the risk of losing is the risk of letting Europe's valuable industrial base simply wither away. Time is short, but Brussels can still fight back.'
The evolving international market landscape reflects growing economic tensions that could have serious consequences for Europe. Amid deteriorating trade relations with China, the EU must seek new alliances with other nations, such as:
- Japan
- South Korea
- Brazil
- Malaysia
- Turkey
This underscores the need for a strategic approach to shaping foreign policy and economic relations to ensure the stability and competitiveness of European industry.
As the EU grapples with the escalating trade tensions with China, the implications of the region's technological stagnation are becoming increasingly apparent. This lag could potentially position Europe as a mere pawn in the strategic rivalry between major global powers. For a deeper understanding of how this technological gap might influence the EU's standing, read more about the risks associated with becoming a target for both the US and China here.