China Views EU as Losing the Trade Wars

China 1—America 0 and soon, a Chinese draw with EU. Chinese Supremacy—American Idiocy

China is the EU’s second largest trading partner for goods after the United States. According to the official eurostat data:

In 2024, the EU exported goods worth 213.3 euro billion to China and imported 517.8 billion euro, resulting in a trade deficit of 304.5 billion euro. China was EU’s largest trade partner for imports (21.3% of all extra-EU imports) and the third-largest partner for exports (8.3% of all extra-EU exports).

Compared with 2023, both imports and exports decreased, by 0.5% and 4.5%, respectively. Between 2014 and 2024, imports from China increased by 101.9%, while exports grew by 47.0%.

The EU-China trade balance has been persistently in favor of China.

Click to enlarge

Source dataset: ext_st_eu27_2020sitc

However, the balance of challenges and opportunities presented by China has shifted over time. The economic relationship is critically unbalanced, both in terms of trade flows and of investment, due to a significant asymmetry in our respective market openings. In addition, China’s economic model has brought about systemic distortions with negative spillovers to trading partners. According to the IMF, China’s use of industrial policies, notably its support to priority sectors, has an impact on trading partners.

For the EU, ensuring reciprocity, achieving a level-playing field, and addressing asymmetries in the relationship are matters of priority. The EU remains committed to addressing these challenges through dialogue with China and underscores the importance of the WTO as the best avenue to address the root causes of the current imbalance.

Friedrich Merz and Wang Yi met on 4 July. Photo: Ministry of Foreign Affairs of the People’s Republic of China

Chinese Foreign Minister Wang Yi made a round trip of some European capitals last week, including an inaugural meeting with German Foreign Minister Johan Wadephul. It is also a preparation for the EU-China Summit in Beijing later this month. Even if the relation is (strained) business as usual, there are several issues that reveal some increased tension in the process leading up to the summit. Rare earth metals is considered a hot issue by EU, while the Chinese openly consider it a non-issue. At least, China indicate it is not directly using that bargaining chip like they do to the Americans.

However, it looks like the summit will be overshadowed by US related issues, anyway. Chancellor Merz is doubtful in participating in Beijing, and the Chinese announced that they might want to short down the format. The new issue that has appeared is that the EU Commission has announced proceedings against two lesser Chinese banks because of their alleged facilitation of Russian transactions. Wang Yi reacted strongly to that and stated that China will retaliate, should it happen.

At their joint press conference Wadephul called China's export restrictions on rare earths non-transparent, one-sided and detrimental to mutual trust. Wang countered that export restrictions on dual-use goods, such as rare earths, were simply necessary, and that European companies should have no problem with them. In early April 2025, China implemented export controls on specific rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. The move, seen as a response to US trade policies, has led to delays and price increases for rare earth materials. Wang denies that an agreement on rare earths between the EU and China is necessary. ‘This is not a problem between us’, he said.

Regarding support to Russia, Wang replied by saying that if any other information were available, Beijing would be happy to provide it. Should it turn out that dual-use goods could be used for military purposes, China would halt their export.

Later, in a meeting with the EU top diplomat Kaja Kallas, Wang shocked her by stating that it is not in China’s interest that Russia lose their war on Ukraine. On the contrary, getting Russia to pull out would obviously release some US resources that China would then have to bother with in the Pacific arena. Perhaps slightly more diplomatic in wording, but the message to EU and Kallas was actually raw and unconditional geopolitical power projection. Wadephul, on the contrary, stressed that ending the war and restoring peace in Europe is a core German interest. He insisted that China must fulfill its role as a permanent member of the UN Security Council and actively work to bring Russia back to the negotiating table.

China’s view

So far, the ongoing power struggle between USA and China has not yielded much in favor of America. On the contrary, whenever China takes a hit, so as with the extreme tariffs imposed unilaterally by Trump, China waits it out for a bit and then strikes back. Concerning the tariff conflict with EU, China considers EU to be on the losing end of the relationship, at least so far. China sees EU as having hit an epiphany about its view of the US after Washington disregarded European concerns on Ukraine, pressured NATO allies to boost defense spending, criticized EU values and imposed tariffs. The power imbalance will inevitably lead to EU having to give in on some initial positions, is the Chinese thinking.

So writes the Chinese government newspaper China Daily:

The United States and the European Union are racing to finalize a trade deal ahead of a July 9 deadline, but analysts warn that deep divisions over tariffs, regulations and geopolitical priorities leave little hope for a timely agreement.

The trade dispute shows a widening rift between the two sides, experts said. The aggressive trade policies and harsh words of US President Donald Trump's administration toward Europe have eroded trust and accelerated Europe's push for strategic autonomy, they added.

Tensions have simmered for months. In April, the US imposed a 20 percent "reciprocal tariff" on most EU imports, later reducing it to 10 percent to allow room for negotiations. Frustrated by the slow progress, Trump warned on May 23 that tariffs could jump to 50 percent by June 1 if no deal was reached.

However, after a "very nice" phone call with European Commission President Ursula von der Leyen on May 25, Trump extended the deadline to July 9, offering a glimmer of hope for a breakthrough.

Still, analysts remain pessimistic about the prospects for a swift and successful resolution, citing complex sticking points, power imbalance and US arbitrariness in the negotiations.

"As the EU's latest zero-for-zero tariff has stalled amid US pushback, the outcome of US-EU talks can only be suboptimal."

Michele Geraci, former undersecretary of state at Italy's Ministry of Economic Development, said a timely agreement is "almost impossible" for both technical and political reasons, because neither side wants to be perceived by its own people as conceding.

The negotiations are further complicated by the "unequal" US-EU relationship, Geraci said, describing it as "one between a stronger hegemonic economic power and a weaker player".

The government newspaper notes, in conclusion, that EU is fast-tracking a diversified economic cooperation network, including advancing trade negotiations with India, Australia and Southeast Asian countries, while adopting a more pragmatic stance toward China. ‘Going forward, US-Europe cooperation and competition will coexist, but competition will intensify.’