EU-China trade tension on display ahead of Beijing summit – DW – 07/15/2025

DW

15-07-2025

The summit was moved from Brussels to Beijing, then reduced to one day from two. As the European Union struggles to curb China's unfair trade practices, are tougher tactics needed to cut the €400 billion trade deficit?
The odds of a breakthrough to resolve trade frictions at next week's EU-China summit in Beijing appear slim after China cut the planned two-day talks to a single day.
The summit, set to mark the 50th anniversary of EU-China diplomatic ties, was moved from Brussels to Beijing after Chinese President Xi Jinping declined an invitation to attend. European Commission President Ursula von der Leyen and European Council President Antonio Costa will now meet Xi, or Premier Li Qiang, in the Chinese capital.
"This is another sign of Beijing's limited willingness and ambition to engage with the Europeans," Alicja Bachulska, policy fellow of the Asia program at the European Council on Foreign Relations (ECFR), told DW. Bachulska said China's elites often view the EU as a midlevel power with limited leverage in trade negotiations.
The European Union's €400 billion ($467 billion) trade deficit with China is driving the dispute, fueled by restricted access to the Chinese market for EU producers. China's industrial policies favor domestic suppliers, who benefit from huge subsidies, access to government contracts and favorable regulations.
EU officials say these policies have caused significant overproduction, leading to the "dumping" of cheap Chinese electric vehicles (EVs) onto the EU market, harming the domestic auto sector.
"The scale of China's economy — the scale of subsidies, overcapacity and government intervention — is immense," Bachulska said, adding that, without "serious action" to protect Europe's auto industry, the EU risks "partial deindustrialization" within a few years.
The European Union has imposed tariffs of up to 45% on Chinese EVs and demanded an end to overcapacity and reciprocal market access to ensure a level playing field for EU exporters.
China, meanwhile, wants to replace EV tariffs with minimum price commitments, alongside other concessions.
In April, the concerns about China's trade practices led the European Union to create an Import Surveillance Task Force to help protect the bloc's internal market, which could trigger EU anti-dumping duties or other safeguards.
The task force promptly noted an 8.2% increase in China's exports to the European Union in April, compared with the same month in 2024, which it attributed to Chinese exporters diverting US exports to the EU to avoid Trump's higher tariffs.
China denies giving domestic manufacturers unfair advantages and accuses the European Union of protectionism. Beijing justifies favoring local producers by citing national security and economic development needs.
With EU negotiators unable to secure significant access to the Chinese market, China's chokehold on rare earth minerals, which are essential for clean technology, chipmaking and medical equipment, is another major point of contention.
According to the European Commission, the EU relies on China for 98% of its rare earth supply, as well as rare earth magnets.
China introduced curbs on rare earth exports last year, causing supply chain delays and production stoppages for EU firms. Subsequently, the value of rare earth shipments to the European Union fell by 84%, to $15.1 million (€12.9 million), in the first five months of 2025, according to Chinese customs data.
At June's G7 summit in Canada, von der Leyen accused China of "coercion" and "blackmail" over the curbs, adding that "no single country should control 80-90% of the market for essential raw materials and downstream products like magnets."
China's government has rejected the criticism. Last week, a spokesperson for the Foreign Ministry spokesperson suggested that the European Union's "mindset" needed to be "rebalanced."
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Although European Trade Commissioner Maros Sefcovic negotiated an easing of export controls for rare earths in June, allowing a "green channel" for some EU manufacturers, many firms report that approvals are too slow to prevent supply chain disruptions.
The European Union already has its Anti-Coercion Instrument to monitor examples of economic coercion such as China's minerals curbs. There are now growing calls for European policymakers to take a harder line on Beijing in response, including tariffs, procurement bans, or other measures.
"We need to push this message that Europe will be assertive and we have tools, such as the Anti-Coercion Instrument, if push comes to shove," Bachulska said. "But they require the political will to be used."
Some EU observers see US President Donald Trump's tariffs, which helped upend decades of close trans-Atlantic relations, as an opportunity for the European Union to reset ties with the world's second-largest economy. Faced with major disruption to its US trade, they say China needs Europe more than ever and can be pushed to offer concessions during next week's summit.
"I think these voices are very naive," Bachulska said. "China has won the first round of the trade war with the US, and there is a strong feeling in Beijing that time is on their side" in negotiations with the EU.
After all, Xi is shifting China's economy from quantity-driven growth to what he called "high-quality development," prioritizing new technologies, domestic demand, security and the environment.
China is already challenging the West's technological dominance, including in artificial intelligence , supercomputing and EV production. In some cases, like 6G communications, it has surpassed the West.
Some analysts say the European Union continues to underestimate the economic threat from China and has failed to adopt a tougher approach to counter some of the country's unfair trade practices.
"There's a tendency to sideline China-related issues in Europe because we just have so many things on our plates," Bachulska said, referring to the Ukraine war and the EU's trade dispute with Trump. "China seems just to be a geographically distant challenge ... [but] many of the impacts of Chinese policies are going to be felt in Europe very soon."