EU-China Tensions Rise as Trade War Risks Emerge: 5 Key Points

Central News

(Central News Agency, Beijing, 17 - compiled international reports) As the European Union's (EU) trade deficit with China continues to expand, authorities in Brussels have introduced protective measures on electric vehicles and e-commerce platforms, intensifying trade tensions between the EU and China and heightening global concerns over a potential trade war.

Beijing has called for disputes to be resolved through dialogue, while warning it may retaliate against protectionist policies.

European leaders are set to hold a summit on the 18th of this month. Below are five key points compiled by AFP on the escalating EU-China trade tensions:

● How large is the trade deficit?

The European Commission stated last month that the trade deficit with China has reached "unsustainable" levels. According to Eurostat data, the EU's trade deficit with China reached €31.9 billion (approximately NT$1.16 trillion) in April alone this year.

Maros Sefcovic, the EU's Trade Commissioner, said on the 15th that EU-China trade relations have reached a stage that requires rebalancing: "not confrontation, but restoring balance."

Cai Run, China's ambassador to the EU, said last month that Beijing "fully understands" the EU's concerns and emphasized that China "has never deliberately pursued a trade surplus," expressing willingness to address related issues.

He noted that China has taken a series of measures, including expanding market access for European agricultural products, eliminating export rebates for Chinese solar products, and restricting exports of certain Chinese electric vehicles.

Beijing denies that Chinese companies' overseas success stems from high government subsidies, stressing that their competitive edge comes from innovation, economies of scale, and a complete industrial base.

● What is the current state of relations?

EU-China relations have further deteriorated this year as Brussels strengthens legislative tools to counter China.

The EU is concerned that Chinese dominance in sectors such as electric vehicles, chemicals, and green technology could undermine European domestic industries. It also demands greater market access, arguing that Beijing does not offer European companies reciprocal treatment.

Meanwhile, China has warned that it will take countermeasures if the EU passes the draft "Industrial Accelerator Act" (IAA), which would exclude non-EU products from public procurement and restrict foreign investment in European firms.

The European Commission is also reviewing its cybersecurity regulations, aiming to exclude high-risk suppliers like Huawei from telecom networks. Additionally, Chinese electric vehicles exported to Europe will face additional tariffs starting in 2024.

● How high is the risk of a trade war?

Xu Dingbo, a professor at the China Europe International Business School (CEIBS) in Shanghai, said the risk of an EU-China trade war is real.

Elvire Fabry, a geopolitical trade expert at the French think tank Jacques Delors Institute, believes Europe must now demonstrate resolve and establish a balance of power.

However, CEIBS economist Zhu Tian noted that both sides have an interest in reconciliation.

He said escalating conflict would harm both parties: Europe would face rising costs and slower green transition, while China could lose a vital market.

● How might China respond?

If the EU further strengthens protectionist measures, Beijing still has multiple tools for retaliation.

Zhu Tian said China could launch anti-dumping investigations, tighten regulations, restrict specific industries, or pressure politically sensitive European products.

China has previously imposed anti-dumping duties on European brandy and launched anti-dumping investigations into EU pork and dairy products.

This time, the EU is particularly concerned that China might restrict exports of rare earths, critical for high-tech industries.

Zhu Tian believes China will likely respond cautiously: "enough to make the EU feel the cost, but not enough to completely rupture bilateral relations."

● How important is the EU to China?

The EU is China's second-largest trading partner. Fabry said that as the U.S. market gradually closes, China needs access to the European market.

Zhu Tian said increased Chinese investment in Europe could create jobs and signal to European policymakers that "China takes European concerns seriously."

He believes China can help by further opening its market, expanding imports, and increasing investment, but Europe must also enhance its own competitiveness.

Joerg Wuttke, former president of the European Union Chamber of Commerce in China, said China still has a chance to avoid a trade war, but only if it implements openness in practice, not just in rhetoric, as "China has been talking about opening up for 20 to 30 years."

(Translation: Liu Wenyu) 1150617