EU and China: Anniversary summit amidst disagreements Economic Cold War?

The European Commission is at a crossroads: should it continue to escalate trade wars with China? Or should it attempt to improve relations with the Chinese giant amidst the intensifying economic rivalry with the United States?

A summit without the chairman

Chinese President Xi Jinping declined the invitation to the summit dedicated to the 50th anniversary of the establishment of diplomatic relations between the EU and China. At the summit, China will be represented by Premier Li Qiang. Is this Beijing's protest in response to a series of recent unfriendly actions by the EU? Or is President Xi simply too busy?

On one hand, it seems like nothing extraordinary has happened. There is an established practice where the leader of the Chinese government participates in meetings in Brussels, while the head of the Chinese state attends summits in Beijing. However, in this case, the EU wanted to have Chinese President Xi Jinping himself at the anniversary event and extended a special invitation. And they were met with a refusal. The Chinese Ministry of Foreign Affairs declined to comment on the situation, while the European Commission stated that informal discussions about the level of representation are still ongoing. However, the EU acknowledges that, due to Xi Jinping's refusal to attend this key summit, their relations with China are currently undergoing serious tests.

But the interaction between Beijing and Brussels has long been facing growing problems. There is now much talk about accusations from the EU against China for allegedly supporting Russia in its war with Ukraine. In reality, China has not provided any military aid to Russia. Western discontent has more likely stemmed from Beijing's calls for an immediate peaceful resolution to the bloody conflict, which no one seems to want. Furthermore, the conflict poses a challenge to the stability of Chinese trade in the region.

In reality, the main line of tension between Europe and China is economic competition, which the EU is hopelessly losing. Back in 2019, the "EU-China Strategic Outlook" defined these relations as "partnership, competition, and systemic rivalry." In 2020, the European Parliament refused to ratify the Comprehensive Agreement on Investments between the EU and China. In March 2021, EU leaders imposed sanctions on various officials of the Communist Party of China. On March 30, 2023, European Commission President Ursula von der Leyen delivered a speech calling for a tougher stance on China. That same year, the European Parliament imposed restrictions on contacts with Chinese officials, citing "human rights violations in Xinjiang." However, the likely main reason for the deterioration in relations may be the growing trade deficit between the EU and China, which reached $400 billion in 2023. As a result, at the previous 24th EU-China summit, held in Beijing in December 2023, European politicians began discussing more "balanced trade and economic relations," the need to reduce the EU's critical dependencies on China, and attempted once again to lecture Chinese leaders on human rights and the "rules-based world order."

In the 2024 report by former ECB President Mario Draghi, China was identified as one of the two main competitors of the EU, alongside the United States. Apparently, Europe is suffering the most from Chinese competition in the fields of electric vehicles, solar panels, and certain other elements of green energy. For instance, Chinese electric vehicle exports to the EU have increased more than sixfold over the past four years. Additionally, China's share of the photovoltaic market in the European Union now exceeds 90%. Unable to beat Chinese manufacturers in the free market, the European Commission decided to resort to administrative measures in the form of higher tariffs, cloaking this economic suppression with rhetoric about excess production capacity, state subsidies, and dumping.

In October 2024, the largest act of trade war between the EU and China in the past decade erupted. Brussels then imposed a 45.3% tariff on Chinese-made electric vehicles, in addition to the standard 10% tariff. Such blatant protectionism is displayed by radical proponents of the "free market" when it comes to the profits of their own companies. Against the backdrop of the standoff with China, the West has forgotten about its "green agenda." Environmentalists are already expressing concerns that the tariff hikes on Chinese electric vehicles could hinder the achievement of the EU's CO2 reduction targets by 2025. In any case, European consumers will suffer, as the prices of electric vehicles are expected to rise significantly following the tariff imposition.

This decision was preceded by an anti-subsidy investigation by the European Commission into Chinese manufacturers. The "investigation" claimed that China's production capacity, which manufactures 3 million electric vehicles per year, is twice the size of the EU market. The European Commission seemed to be afraid that, following the strict restrictions imposed by the U.S., Chinese electric vehicles would flood the European market. At the same time, the higher tariffs on Chinese EVs are quite a painful measure for Beijing, as up to 30% of China's electric vehicles are exported to EU countries.

In response, Beijing did not leave these unfriendly measures unanswered and introduced temporary anti-dumping tariffs on specific types of brandy from the European Union, including "Hennessy" and "Rémy Martin." Almost all brandy imports to China come from the French cognac industry. Representatives of the French cognac industry, acknowledging that these measures are a direct response to the tariffs on Chinese electric vehicles, have called on their government to protect French brandy producers.

Anti-subsidy investigations were also initiated in China regarding dairy products, pork, and plastics from the EU. These investigations were launched back in the summer as a kind of preventive measure against the impending tariffs on Chinese electric vehicles. Before the vote in the EU, China, as a goodwill gesture, suspended its anti-dumping investigations. However, this did not work, and Chinese electric cars were hit with the full tariff rate. Apparently, the lobbying power of the European automotive industry, even the French (rather than the German) manufacturers, proved stronger than that of the dairy producers, cognac makers, and meat producers.

Tariff war with China – A split in the EU?

Today, there is no unanimity in the EU regarding punitive economic measures against China. Hungarian Prime Minister Viktor Orbán has already stated that the EU is heading towards an "economic cold war" with China. The issue is that, while Chinese competition harms certain segments of European business, other sectors and countries greatly benefit from cooperation with China. It is likely for this reason that, 10 years ago, the EU failed to adopt sanctions against Chinese solar panels. The current vote on tariffs on Chinese electric vehicles was also difficult, and the decision had to be made by the European Commission. In fact, the majority voted against the tariffs — only 10 out of 27 countries voted in favor, 5 voted against, and 12 EU states abstained. The restrictive tariffs against China were supported by France, Italy, Poland, the Netherlands, Ireland, Latvia, Lithuania, Estonia, Bulgaria, and Denmark. On the other hand, Germany, Hungary, Malta, Slovenia, and Slovakia opposed the tariffs. Austria, Belgium, Croatia, the Czech Republic, Greece, Romania, Spain, Portugal, Cyprus, Luxembourg, Sweden, and Finland abstained. The most curious position here is Germany’s relatively "pro-China" stance, considering that its automotive industry, the largest source of national income, has been severely impacted by Chinese imports. It’s worth noting that, besides the interests of various industries, which may or may not be keen on trading with China, two conditional camps have emerged regarding Chinese electric vehicles. Interestingly, this divide somewhat mirrors the traditional bloc division of continental Europe, almost like the situation on the eve of World War I. Several Central and Eastern European countries, diplomatically abstaining from the vote on tariffs for China, show relative proximity to the first conditional "German-Chinese" bloc.

There is nothing surprising in Germany's position. Likely recognizing that halting China's economic progress is much more difficult than stopping an invasion by Attila, even some of the top executives of Germany's automotive industry have decided that cooperation might be more reasonable. For instance, BMW is teaming up with Huawei to develop intelligent applications based on the Harmony operating system. By the way, BMW's CEO, Oliver Zipse, referred to the introduction of tariffs on Chinese electric vehicles as a "fatal signal for the European automotive industry." As one of the potential retaliatory measures, Beijing considered imposing tariffs on larger gasoline-powered vehicles, which would primarily affect German automakers. On the other hand, the French automotive association PFA welcomed the tariffs, with Renault’s stock rising following their introduction.

On March 17, Reuters reported that Chinese automotive giant BYD is considering building its third car plant in Western Europe, in addition to the two assembly facilities already under construction in Türkiye and Hungary. At the same time, Beijing has a directive in place not to invest in countries that supported anti-China sanctions. This effectively leaves Paris and Rome out of the race for billions in Chinese investments. Meanwhile, Germany’s chances of becoming the “third pillar” of China’s automotive industry in Europe are rising rapidly. The country offers ready-made production facilities and a skilled workforce—although high labour costs remain a concern for Chinese corporations.

In fact, Chinese executives have already explored the possibility of setting up production at several struggling German plants, including Volkswagen factories facing closure due to the ongoing crisis. Regardless of the final decision, an expansion of Chinese carmakers into Germany would mean new jobs, salaries, tax revenues, and demand for resources across various sectors of the German economy. BYD’s vehicle sales in Europe are projected to reach 186,000 units this year, up from 83,000 in 2024, and could soar to 400,000 by 2029.

German investments in China are also on the rise. In just the first half of 2024, they reached €7.3 billion, surpassing the total €6.5 billion invested in 2023. Volkswagen and BMW have been particularly active in expanding their presence in the Chinese market. Meanwhile, Chinese companies are making inroads into the European automotive sector—Geely already owns a controlling stake in Sweden’s Volvo Cars.

Even a quick look at individual EU member states' trade balances with China explains the divisions and abstentions in the recent vote on tariffs for Chinese electric vehicles. Beijing has been pouring significant investments into Spain’s lithium battery industry, Ireland’s green economy, and various other EU economies. Notably, Ireland is one of only two EU countries with a positive trade balance with China.

China is not just a major importer—it is a crucial market for European exports, with Germany leading by a wide margin. In 2024, German exports to China totaled €89.9 billion. France ranked second (€23.9 billion), followed by the Netherlands, Italy, and Ireland. On the import side, the Netherlands brought in the most Chinese goods, followed by Germany, Italy, France, and Spain.

China’s relations with France and Italy are quite contradictory. China has become France’s largest trading partner outside the EU, yet France faces a significant trade deficit. At one point, France was considered one of the most China-friendly countries in the EU, but in 2020, it opposed the Comprehensive Agreement on Investment (CAI) with China and, in October 2023, also voted in favour of tariffs on Chinese electric vehicles. In 2019, Italy joined China’s Belt and Road Initiative (BRI), becoming the only G7 country to do so. However, in 2023, Rome withdrew from the project under U.S. pressure.

China – Europe’s key partner

In 2020, China surpassed the United States to become the EU’s largest trading partner in terms of goods volume. U.S. opposition to further expansion of China-EU cooperation remains one of the key factors limiting it. However, the current phase of China-EU relations has a unique feature—it is unfolding against the backdrop of economic tensions between Brussels and Washington. Donald Trump immediately announced a 25% tariff on certain EU goods. Now, on 3 February 2025, European Commission President Ursula von der Leyen, in a speech to European diplomats, stated that the EU might move toward closer ties with China in an "era of hyper-competitive and hyper-transactional geopolitics." This comes despite von der Leyen being regarded as one of the EU’s most prominent "anti-China hawks." Moreover, on 24 March 2025, Spanish Foreign Minister José Manuel Albares called on the EU to develop a new approach to China that is independent of the United States.

Nevertheless, the EU's position on China remains contradictory and fluctuating. The European Union has announced an acceleration of customs reforms and has abolished the duty exemption for goods valued under €150. In 2024, 90% of such shipments came from China. The EU’s High Representative for Foreign Affairs, Kaja Kallas, stated that China would benefit the most from the trade disputes triggered by U.S. President Donald Trump against his allies. Moreover, the EU has recently launched an anti-dumping investigation into Chinese exports of adipic acid—its 11th such case since October last year.

Still, it seems that Brussels is now leaning towards a modest improvement in relations with Beijing. Economic realities and the intensifying competition with its main ally, the U.S., are pushing Europe in this direction. Regardless of whether Brussels likes China and the Chinese Communist Party or not, in 2024, China was the EU’s largest partner in imports and the third-largest in exports. On 8 March 2025, Members of the European Parliament lifted restrictions on contacts with their Chinese counterparts, which had been imposed in 2023.

However, it is clear that China’s leadership is interested not just in symbolic gestures but primarily in concrete economic progress and the unblocking of trade relations. It is likely that Chinese President Xi Jinping’s decision to forgo participation in the EU-China anniversary summit reflects precisely this stance. Nevertheless, negotiations on the level of China’s representation at the 50th-anniversary EU-China summit will continue. Meanwhile, it has recently emerged that the EU’s Commissioner for Trade, Maroš Šefčovič, is planning to visit Beijing in the near future…