‘Elephants trampling on global trade': EU sidelined by US-China showdown

The Star

6 hours ago

Over two rounds of high-stakes talks on European soil, Europe has watched from the sidelines as the US and China tried to reach a truce that might stabilise the global trading system on which the continent is entirely reliant.
Outcomes in Geneva and London that momentarily steadied the ship have been welcomed, even as officials in European capitals frantically parsed statements, posts and tweets for clues as to how the reverberations of US-China engagement would reshape Europe's trade ties, both with the superpowers and beyond.
In Brussels and other capitals, the exchanges served as a reminder of the extent to which Europe's fortunes have become hostage to the whims of giants in Beijing and Washington.
'We are not a beneficiary of any of this [conflict]; we are victims of two elephants trampling on global trade,' said Joerg Wuttke, a partner at DGA-Albright Stonebridge Group, who spent decades as Europe's top business lobbyist in China.
On Wednesday evening, European Union officials went to bed after hearing US Treasury Secretary Scott Bessent say it was 'highly likely' that a pause on Trump's 'reciprocal tariffs' of 50 per cent on EU goods would be extended beyond the July 9 deadline.
They awoke on Thursday morning to Trump himself saying he would send letters to countries 'in about a week-and-a-half, two weeks ... telling them what the deal is'.
'At a certain point, we're just going to send letters out. And I think you understand that, saying this is the deal, you can take it or leave it,' Trump said.
For Europe, the timing matters. A summit with China is set for July 24, and Brussels insiders have long believed that the outcome of Trump's tariff review would help determine what could be achieved during those crunch talks in Beijing.
'I personally wouldn't be shocked if they meet on July 24 and things have gone in reverse, where you have tariffs on Europe at 50 per cent and tariffs on China at 30 per cent. Can you imagine?' said Deborah Elms, head of trade policy at the Singapore-based Hinrich Foundation.
'It could be anything and you cannot expect to have greater clarity, or assume you are going to end up with a better situation in the future. I would say to the Europeans – and this is very hard to do – but you have to detach US policy from your own self-interest. What is it that will work for you?'
While a loosening of China's export controls on rare earth elements would be welcomed in Europe, where companies have been hit by punishments designed for the US, there has not yet been any formal indication that this has happened.
'As far as I know, that has not been communicated to us yet in any structured way,' EU trade spokesman Olof Gill said on Tuesday.
Anecdotally, EU business groups said licences were starting to be allocated. 'China understands that it is a weapon that they need to be very cautious [about] using, because it forces both America and Europe to invest massively in their capabilities,' said Jens Eskelund, chair of the EU Chamber of Commerce in China.
A lowering of tariffs could help reduce the potential for trade diversion, a downstream impact of Trump's policies that has terrified EU companies. But the broader superpower tensions, Eskelund said, gave Europe a stronger hand when dealing with Beijing.
'No matter how much they actually agree in London, China will seek to decouple from the United States. I think there's so much animosity now that for China, as well as the United States, it is all about reducing dependencies right now,' Eskelund said.
'That is where I think there is a fundamentally different relationship with Europe. You need someone to counterbalance what you lose when you decouple yourself from the United States, and that is where I think, for China, there's a role for Europe to play.'
In the meantime, the mood music ahead of the EU-China summit continued to confuse. While Beijing was talking up the potential for positive outcomes, EU officials remained gloomy.
Ambassadors from the 27 member states discussed the leaders' summit agenda on Wednesday, with far more negative items floated than issues of cooperation. China's ties with Russia and unbalanced trade are expected to be the EU's top priorities in discussions with Chinese President Xi Jinping and Premier Li Qiang.
On June 23, meanwhile, EU foreign ministers are scheduled to discuss China in the context of European security.
'Asking for optimism these days is not a small ask, and I think that is important to keep in mind,' the EU's deputy director general for trade, Maria Martin-Prat, said at an event in Brussels last week, adding that there was 'a huge amount of work that needs to be done between now and the summit'.
Several EU insiders rejected a recent statement by China's commerce ministry claiming that a deal that would replace the bloc's tariffs on Chinese-made electric vehicles with a complex price undertaking arrangement was in the 'final stages'.
One of the sources claimed there had been little movement on the talks this year, while a second recognised it as an effort from Beijing to pressure European Commission negotiators to reach a deal.
While open to reaching an agreement on EVs, Brussels has doubled down on its tough approach to Beijing on other fronts.
A new package of Russia sanctions proposed this week targets two regional Chinese banks accused of using cryptocurrency transactions to import goods covered by previous EU sanctions, the Financial Times reported.
The bloc on Tuesday slapped a 62.4 per cent anti-dumping duty on Chinese shipments of hard plywood. The commission said it was also monitoring soft plywood imports over suspicions that Chinese sellers were camouflaging exports of hard plywood to dodge duties.
These add to recent moves to put a flat tax of €2 (US$2.30) on small packages after a flood of deliveries from Chinese e-commerce platforms Temu and Shein threatened to overwhelm the bloc's postage services, and to ban Chinese med-tech companies from lucrative EU procurement tenders.
Beijing, on the other hand, continued to look for openings in Europe. Amid reports that it would offer to buy hundreds of Airbus craft ahead of the summit, the Post reported this week that China wanted EU regulators to certify its domestically produced C919 aircraft.
Such accreditation would help open the door for international airlines and lessors to start purchasing the aircraft, although Europe's aviation regulator said in April that it needed between three and six years to certify the Comac jet.
This week also saw developments in two areas in which China was seen to have retaliated against the EU's tariffs on Chinese-made EVs.
Sources in the brandy industry confirmed that a range of minimum prices has been offered to Beijing in a bid to have anti-dumping duties removed from EU cognac imports. This would cover some shipments but leave others unaffected.
The proposal comes amid job losses among French drink companies, and as some smaller companies have had to stop selling to China due to the rising costs. An industry source described it as a 'survival strategy' ahead of the summit, where they hoped leaders would resolve the feud.
Earlier this week, meanwhile, China extended the deadline for an anti-dumping investigation into EU pork shipments until December, buying Spanish, Danish and Dutch farmers a reprieve.
But Brussels is unlikely to be moved by a delay in Beijing's application of retaliation against what the EU sees as a legitimate investigation into China's EV subsidies. The bloc has been holding out for something more meaningful.
'Generally, I think the message with China is that it should not be taking for granted the openness of the EU market,' said Martin-Prat.
'I think China has realised how we have been developing a whole range of autonomous measures, what we refer to as our toolbox, and how we are ready to use those tools.' - SOUTH CHINA MORNING POST