China and the European Union can’t seem to get along, despite sharing a common foe in U.S. President Donald Trump and his trade war.
On Tuesday, European Commission President Ursula von der Leyen said that there needed to be a “genuine rebalancing” in the China-Europe relationship. Her comments cast a shadow over an upcoming China-EU summit, where the two sides are meant to hash out issues on geopolitical and economic issues.
In her comments, von der Leyen slammed China’s tactic of flooding “global markets with subsidized overcapacity” in order “to choke international competition,” and complained that European products were “systematically discriminated” against in China.
Beijing hit back on Wednesday, saying that “what needs to be rebalanced right now is Europe’s mentality.”
Von der Leyen’s remarks come on the heels of a trade dispute over government procurement of medical devices.
On Sunday, China announced that it will stop procuring European medical equipment for contracts that exceed $6.3 million in value. It will also restrict access to non-EU companies where over half the contract value comes from importing EU components. China’s commerce ministry said these measures were “reciprocal,” in retaliation for the European Union’s mid-June decision to stop buying Chinese-made medical devices for contracts worth more than $5.8 million.
Brussels, at the time, called their decision a “response…proportionate to China’s barriers.” An investigation by the European Commission previously concluded that China had unfairly excluded European medical devices from Chinese government contracts.
It’s the latest tit-for-tat trade action between China and Europe, even as the U.S. and President Donald Trump dominate global headlines.
On Friday, Beijing imposed anti-dumping taxes on European brandy, with French company Jas Hennessy getting the highest rates at 34.9%. China has also threatened or imposed tariffs on European dairy and pork products.
Beijing’s trade measures came after the European Commission imposed an anti-subsidy tariff on Chinese-made electric vehicles in October, following a lengthy probe into whether Chinese EV companies received an unfair level of state support from Beijing.
Why can’t China court Europe?
U.S. President Donald Trump has targeted both China and the European Union with tariffs. Currently, U.S. tariffs on China stand at 55%, among the highest for any country.
European goods face a 10% tariff upon entering the U.S., with higher tariffs on specific goods like steel, aluminum and cars. On April 2, Trump imposed a 20% “reciprocal” tariff on the European Union, which has since been suspended to allow for negotiations.
In theory, U.S. pressure should be pushing economies to forge new trading links: If the U.S. market is closed off, then Chinese companies could turn to the European market instead, and vice versa.
But in practice, Beijing and Brussels have found it hard to forge common ground. Beijing reportedly plans to scrap part of a two-day China-EU summit.
“We need a genuine rebalancing: fewer market distortions, less overcapacity exported from China, and fair, reciprocal access for European businesses in China,” von der Leyen said on Tuesday. “We want to see tangible progress on our longstanding requests for market access.”
One flashpoint is China’s control of rare earths. These minerals, key to electronic components and batteries, have become a new flashpoint in trade relations. China, earlier this year, slapped controls on any rare earth exports, including those bound to countries other than the U.S. China customs data shows that rare earth exports to Europe fell by just over 80% in May.
Another concern is that China may flood the European market with cheap exports. European leaders accuse China of “overcapacity,” or relying on manufacturing beyond what China’s economy can absorb to support economic growth. These exports must go somewhere—and so get dumped on overseas markets like Europe.
Europe and China also disagree on other issues, such as how to handle Russia’s invasion of Ukraine.
Other economies, such as those in Asia, have either considered or imposed more targeted anti-dumping tariffs against Chinese products, like steel.
