Budding EU-China Rapprochement Amid U.S. Tariffs Will Have Its Limits

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A digital illustration of the Chinese and EU flags.

The European Union's cautious rapprochement with China opens the door to limited economic cooperation, but structural constraints and competing priorities on both sides will constrain the prospects of any significant shift from Brussels' broader de-risking strategy toward Beijing. European and Chinese officials have stepped up high-level diplomatic engagement in recent weeks in response to the growing fallout from sweeping U.S. tariff increases. On April 8, European Commission President Ursula von der Leyen held a phone call with Chinese Premier Li Qiang, during which the two leaders agreed to work toward a "negotiated resolution" to the trade disruptions affecting both economies. According to the commission's readout, they emphasized the need for cooperation to preserve global economic stability, prevent further escalation and uphold a fair, rules-based international trading system. Von der Leyen also proposed establishing a joint mechanism to monitor and manage the potential diversion of U.S.-bound Chinese exports to the European Union, particularly for goods already facing global oversupply, and reiterated the importance of structural reforms aimed at rebalancing the EU-China trade relationship and improving European market access. The two confirmed that the upcoming EU-China summit will take place in Beijing in July. Further signs of a diplomatic thaw followed on April 10, when Brussels and Beijing agreed to restart negotiations aimed at removing EU tariffs on imports of Chinese electric vehicles. The move followed a meeting in late March between Chinese and EU negotiators, during which both sides reportedly committed to resolving their trade dispute through dialogue and revisited a stalled proposal to establish a price floor for Chinese EVs sold in Europe. Another sign of thawing came on April 11, when Spanish Prime Minister Pedro Sanchez visited Beijing and met with President Xi Jinping. Sanchez called China an "essential partner" and urged a reset in EU-China relations based on cooperation and negotiation, with Xi in turn calling on both sides to "jointly resist unilateral bullying," evidently referring to U.S. President Donald Trump's recent tariff hikes. On April 23, another sign of detente came from China, with Beijing reportedly preparing to lift sanctions on EU lawmakers and entities in an effort to revive the long-stalled Comprehensive Agreement on Investment (CAI) with the European Union.

The United States recently imposed new, sweeping tariffs on both China and the European Union, among other countries. These include duties of up to 145% on a broad range of Chinese exports, to which Beijing has responded through retaliatory duties of up to 125% on U.S. goods. The European Union was also hit with a 20% "reciprocal" blanket tariff on all exports to the United States — which the White House later paused for 90 days and temporarily scaled back to 10% — alongside previously announced tariffs of 25% on imports of automobiles, steel and aluminum. The European Union has also paused its retaliatory tariffs on about 21 billion euros ($23.2 billion) of U.S. goods in response to the 25% tariffs announced in March and temporarily shelved plans for further tariff hikes in response to the "reciprocal tariff," prioritizing negotiations with the Trump administration.
In October 2024, the European Union imposed additional tariffs on Chinese electric vehicles — reaching as high as 45.3% for some manufacturers — after a European Commission investigation found that Beijing was unfairly subsidizing domestic EV makers, enabling them to undercut EU competitors, gain market share and threaten European jobs. In response, China launched a probe into EU brandy imports and imposed temporary antidumping measures, with the investigation repeatedly delayed to create space for negotiations and de-escalation. Regarding the price-setting plan, China likely previously rejected the proposal, so negotiators' decision to revisit it suggests China has softened its stance, underscoring Beijing's interest in de-escalating trade tensions.
In March 2021, China imposed sanctions on several members of the European Parliament, as well as on EU-linked committees, national lawmakers, think tanks and academics in retaliation for EU sanctions targeting Chinese entities over alleged human rights abuses against Uyghur Muslims in Xinjiang. The move prompted the European Parliament to block ratification of the CAI, effectively stalling the deal just months after it had been finalized. A removal of those sanctions would underscore China's desire to re-engage with the European Union amid deepening isolation from the U.S. market and signal hopes to revive the long-stalled investment agreement with the bloc.

Amid mounting geopolitical tensions, security concerns and a deepening trade imbalance, the European Union has cautiously recalibrated its China policy in recent years, embracing a de-risking strategy aimed at reducing strategic dependencies while preserving essential economic ties. Following nearly two decades of economic engagement since China's accession to the World Trade Organization in 2001, the European Union adopted a more pragmatic, cautious framework in 2019 by simultaneously redefining China as a partner, an economic competitor and a systemic rival. This strategic shift was driven by a growing unease in Europe over China's authoritarianism, increasing military threats in the Taiwan Strait and the South China Sea, deepening ties with Russia, and increasingly explicit anti-Western foreign policy and ambition to reshape the global rules-based order into one more facilitative of authoritarian systems. Meanwhile, China's structural economic slowdown, push for greater self-sufficiency, and aggressive industrial policy aimed at climbing the value chain and achieving dominance in the production of emerging technologies have decreased the economic incentives for engagement and even placed China on a collision course with Europe's industrial base. Though China remains a key export and investment destination for several European industries, this relevance is waning on the back of its rapid industrial transformation, growing local competition and falling domestic demand. Once a major engine of EU export growth, China has become a source of strategic dependency, particularly in digital infrastructure and green technologies. This comes on top of long-standing concerns in Europe over unfair economic and trade practices, including China's use of coercive economic and trade policies to exert geopolitical influence on countries in Europe and elsewhere, its limited market openness to European companies, and its known practices of intellectual property theft and economic espionage. Against this backdrop, the European Union has adopted a strategy of de-risking in recent years aimed at reducing strategic dependencies while enhancing economic resilience and competitiveness, leading to the development of stronger trade-defense tools, tighter investment screening regulations, protectionist policies and diversification measures. Yet, despite these tensions, China remains an important economic partner for the European Union, which still depends heavily on Chinese supply chains and consumer markets, making full disengagement neither feasible nor desirable. Brussels' gradual de-risking approach instead aims to balance sustained economic ties with broader strategic priorities, in contrast with Washington's more aggressive decoupling strategy centered around actively containing China's economic and technological rise.

The European Union has built a comprehensive defensive toolkit in response to China's state-led industrial policies and economic coercive actions (such as its economic retaliation against Lithuania in late 2021 for deepening ties with Taiwan). Key instruments include the Foreign Subsidies Regulation, which enables the European Commission to address market distortions caused by foreign subsidies; the Anti-Coercion Instrument, designed to deter economic coercion through a broad range of retaliatory trade measures; and the International Procurement Instrument, which enforces reciprocity by limiting access to EU public tenders for companies from non-EU countries.
In parallel, the European Union has developed a series of initiatives aimed at spurring supply chain diversification, such as the Corporate Sustainability Due Diligence Directive, which requires companies to identify and mitigate human rights and environmental risks in their supply chains, including those linked to China. The block has also implemented several industrial support packages, such as the Critical Raw Materials Act and the Net-Zero Industry Act, to promote diversification and resilience. Though officially country-agnostic, China remains the main focus of all these initiatives.
In 2023, the European Union released its first economic security strategy, outlining measures to restrict exports and outbound investment in sensitive technologies to adversarial countries and reduce reliance on them for critical goods and growth. While the strategy did not explicitly name China, Beijing was widely understood to be the primary focus. The strategy called for new tools, such as outbound investment screening, and the reinforcement of existing ones like export controls and inward investment screening. Unlike the United States, however, Brussels has avoided blanket bans on tech investment in China, instead proposing targeted restrictions on tech with clear military applications.
Fundamental disagreements among EU members regarding the bloc's relations with China make it difficult for Brussels to develop a unified and coherent approach to Beijing. While the European Commission has embraced increasingly assertive and confrontational rhetoric and policy objectives vis-à-vis China, some particularly influential EU member states — including Germany — tend to favor a more balanced approach due to fears that excessive restrictions could hurt their economic relations with Beijing.

Transatlantic trade tensions have created a window for tactical EU-China engagement, but structural constraints and unresolved disputes limit prospects for meaningful realignment. Renewed EU-China diplomatic engagement could serve a tactical purpose for both sides by strengthening their leverage in future negotiations with the United States — reducing dependence on Washington and better positioning them to resist pressure or secure concessions within broader trilateral trade dynamics. Nonetheless, the scope of deeper strategic realignment remains limited, given the structure of both markets as well as unresolved issues that have strained relations in recent years. Brussels' main objective remains achieving a negotiated solution with the Trump administration to preserve access to its most valuable export market — the United States — something China cannot substitute. Both China and the European Union are trade-surplus economies that depend on external demand and cannot absorb each other's exports, particularly as U.S. demand contracts under the weight of new tariffs. While Beijing may offer token concessions such as limited tariff cuts, its saturated domestic market offers little relief to European companies seeking to offset losses from missing exports to the U.S. market. Nevertheless, the European Union is hedging against the risk of a protracted and escalating transatlantic trade war by at least seeking to reduce parallel trade frictions with China and avoid collateral damage by preventing a flood of redirected Chinese exports as Beijing seeks to mitigate the impact of U.S. tariffs. Although China could, in theory, stimulate domestic consumption to absorb the shortfall, persistent concerns over fiscal sustainability make such a policy shift unlikely. Instead, Beijing is more likely to embrace diversion. Against this backdrop, unless China voluntarily restrains exports, Brussels will come under increasing pressure to deploy trade defense instruments as safeguards against eventual surges of Chinese exports like electric vehicles, machinery, batteries and other industrial goods (a pattern already observed during the previous U.S.-China trade war under Trump's first term). Doing so would all but scuttle any opportunity Brussels and Beijing have to draw closer economically, even if neither side is seeking a broader escalation in trade and other tensions.

In 2024, the United States remained the European Union's largest export market, with EU goods exports totaling 531.6 billion euros ($611 billion) and imports at 333.4 billion euros, resulting in a 198.2 billion euro trade surplus for the European Union, according to 2025 figures by the European Commission. Conversely, China was the European Union's primary source of imports, supplying 517.8 billion euros in goods, while the European Union exported goods worth 213.3 billion euros to China, leading to a significant trade deficit of 304.5 billion euros. For China, the European Union is its largest export destination, followed by the United States, which in 2024 accounted for $438.9 billion of Chinese exports. China seeks to widen its trade surplus with the European Union to offset contracting U.S. demand due to tariffs, while the European Union aims to narrow its deficit with China. This imbalance highlights the opposing goals of both sides and underscores why EU-China trade cannot meaningfully substitute for lost access to the U.S. market.
There are also product categories where the influx of cheaper Chinese goods poses little threat to EU producers, either because these items are not manufactured within the bloc at scale or because European companies are not globally competitive in those segments. Consumer electronics such as smartphones, laptops, tablets and LED TVs, for instance, are largely imported and not a core EU manufacturing strength. In such cases, the risk of market disruption from redirected Chinese exports is minimal, and the resulting deflationary price effect would even benefit European consumers.

Despite structural limitations, the trajectory of EU-China relations may still change depending on the outcome of the transatlantic trade dispute, with a prolonged conflict potentially prompting limited engagement with Beijing that could stabilize — if not modestly improve — bilateral trade ties, while a deal with the Trump administration may accelerate Brussels' alignment with Washington and reignite tensions with China. In the event of a prolonged and escalating transatlantic trade war, with no deal in sight, the European Union may find limited but tangible incentives to deepen engagement with China, with both sides sharing an interest in managing the fallout from sustained U.S. tariffs. Under such conditions, Brussels could move past longstanding disagreements and domestic political constraints to revive lower-risk areas of economic cooperation with Beijing. This could include reopening dialogue on sanitary standards, updating customs coordination, and advancing conversations around mutual recognition of product protections and geographical indications. Talks could also cautiously resume on the long-frozen Comprehensive Agreement on Investment, provided China follows through on lifting the sanctions on EU entities that stalled negotiations in May 2021, and that EU officials themselves put aside the human rights concerns that initially led to the dispute. Still, expectations would remain tempered by lingering mutual mistrust, weak European investor confidence, and China's continued reluctance to offer substantive concessions on key EU demands like tech transfers, market access and industrial subsidies. Should its trade conflict with Washington spiral further, Brussels might lose much of the political capital necessary to drive its de-risking agenda forward, as internal fractures between EU member states would deepen. Beijing would then seek to exploit these divisions by offering selective economic incentives, such as improved market access or rhetorical pressure on Russia, in exchange for EU restraint on tariffs and new investigations. Still, this would do little to address structural imbalances or rebuild long-term trust between China and Europe. By contrast, an EU-U.S. trade deal could push Brussels much closer to Washington's China strategy, should the Trump administration condition tariff relief on greater alignment on economic security. This would give the European Commission a stronger mandate to accelerate its de-risking agenda, including through new antidumping and foreign subsidy investigations, enhanced export controls and tighter investment screening. Brussels could also deepen cooperation with Washington on joint sanctions frameworks and sectoral trade deals that implicitly or explicitly exclude China, such as in steel and aluminum or clean tech. In this scenario, EU-China relations would likely deteriorate rapidly, with Beijing retaliating by deploying its usual toolkit of counter-tariffs, critical raw material export curbs, regulatory pressure on EU companies operating in China and state-driven consumer boycotts — significantly heightening the likelihood of decoupling and a bifurcation in global trade governance.

The restart of talks on electric vehicles highlights the European Union's aim to contain the scope of economic restrictions on China amid the continued fallout from both actual and threatened U.S. tariffs, given how — if unresolved — the EV tariffs dispute may escalate into broader Chinese restrictions on EU exports in economically more important sectors beyond just brandy. An eventual agreement to roll back EU tariffs and China's suspension of its own investigation would mark significant progress, but expectations remain modest. This marks at least the third round of negotiations on EV tariffs, with prior rounds making little progress. Meanwhile, the recently announced 90-day pause on U.S. tariffs on EU imports — though not covering auto tariffs — has likely bolstered Brussels' confidence in its ability to manage transatlantic tensions, reducing the urgency to strike a swift deal with Beijing.