EU Courts Chinese Trade While Bracing for American Tariffs Storm

European Commission President Ursula von der Leyen signaled openness to expanded trade with Beijing this week, as revealed in her February 4 Brussels address. This strategic recalibration comes days before Donald Trump’s 10% tariffs on Chinese goods took effect, with Beijing retaliating by slapping 15% duties on US coal and liquefied natural gas.

Bilateral EU-China trade hit €739 billion in 2023 despite a 14% annual decline, leaving Brussels with a €291 billion deficit. China now supplies one-third of 200 critical EU industrial imports, including 90% of pharmaceutical intermediates.

Meanwhile, Trump’s threats to tax European cars and steel have forced the bloc to hedge its bets. Von der Leyen’s Davos speech last month first floated the idea of “expanding trade and investment ties” after four years of hardening EU policy.

Behind these maneuvers lies Europe’s precarious position: 3.5 million US jobs depend on EU firms, while China absorbs 16% of its exports compared to Europe’s 9% share of Chinese sales abroad.

EU’s Delicate Trade Strategy

The Commission is negotiating a tightrope walk. It imposed 35.3% tariffs on Chinese EVs in January while advancing the frozen €50 billion Comprehensive Agreement on Investment.

This duality reflects hard math – EU exports to China fell 3.1% last year as imports dropped 18%, narrowing but not eliminating chronic imbalances. Trump’s return has accelerated the pivot.

His February 1 executive order greenlit tariffs against allies, sparing none. Luxembourg’s Foreign Minister Xavier Bettel cautioned, “If you don’t negotiate, he kills you,” recalling Trump’s prior steel levies that cost EU exporters $3.2 billion.

China’s response remains measured. It launched a WTO case against EU EV tariffs but continues buying Airbus jets and German machinery. State subsidies still give Chinese firms 30% cost advantages in green tech sectors where Europe aims to compete.

The Commission now races to finalize 12 new trade instruments by March. This includes a carbon border tax that could spark fresh clashes with the US. Trump is targeting $1.5 trillion in annual transatlantic trade. Von der Leyen’s Beijing overture offers both pressure relief and political cover – for now.