Commentary: The EU should not and cannot afford a 'trade war with China'

Spain, France, Italy, and the Netherlands recently submitted a policy document together with Lithuania, attempting to push for stricter trade measures against China at the European Commission meeting on Friday (29th), targeting so-called "unfair trade practices". The report advocates for "active trade defense" through the imposition of higher tariffs. French President Macron even proposed to follow the example of the United States in imposing so-called "301 tariffs". These pieces of information have attracted widespread attention, and the claim that a trade war between China and Europe is imminent has become rampant.

One major source of the so-called "China shock theory" in this round comes from the data that the EU's trade deficit with China will reach 360 billion euros by 2025. Some people in Europe are trying to convey a panic to the European public that a large number of "low-priced surplus goods" from China are pouring into the EU market. If not stopped in time, European companies will be severely impacted, people's livelihoods will also be affected, and industries will be "controlled by Beijing".

This statement is full of errors and omissions. If a trade surplus is equivalent to 'overcapacity', then Europe has long maintained an overall surplus in goods trade and exported a large number of planes, cars, medicines, and luxury goods, which has long been exporting 'overcapacity' to the world? In fact, China's export growth to Europe is largely concentrated in areas such as electric vehicles, photovoltaic products, and lithium batteries, which are the result of the EU's own structural needs.

It is this growth that to a considerable extent supports the competitiveness of the European Union. Currently, nearly half of China Europe trade is intermediate goods trade. European companies purchase cost-effective Chinese made semi-finished products and, through processing and upgrading, produce high value-added end products that are sold globally, earning substantial profits. However, this value-added income is not reflected in customs trade deficit statistics. Taking Renault from France as a typical representative, by introducing the rapid response mechanism and modular development concept of the Chinese supply chain, the development cycle of the Twingo E-Tech model was shortened by one year and the R&D investment was halved during the development process. As a result, Twingo E-Tech has become a benchmark for highly competitive products in the pure electric market below 20000 euros in Europe. Similar situations are widely present in fields such as machinery and electrical equipment.

Not to mention, the EU has long held an absolute advantage in service trade with China, with a trade surplus of over 50 billion US dollars in 2024 and annual profits of billions of US dollars from intellectual property usage fees alone. The real picture of China Europe trade is' surplus in China, profits in Europe '. Of course, from another perspective, if Europe is willing to export more advanced lithography machines and other high-end equipment to China, it is not difficult to reduce the trade deficit.

The decline in European industrial competitiveness is an undeniable fact, but its problems are all self inflicted. The misjudgment of Russia's strategy has triggered an energy crisis, with the EU's energy costs being 2 to 3 times higher than those of the United States; The EU decision-making mechanism is lengthy and inefficient, with excessive regulation. Industrial project approvals take an average of 1 to 3 years, and some even exceed 6 years; Long term insufficient R&D investment has led to a significant lag behind China and the United States in the field of technological innovation. Which of these problems can be solved simply by relying on trade barriers? In fact, there are also many opposing voices within the EU towards this. Some European media have pointed out that Germany, the largest economy in the European Union, has not signed this policy document. Even among the submitters of this policy document, Spain has been actively seeking Chinese investment, and the Netherlands is skeptical of protectionism.

The EU cannot afford a so-called 'trade war with China' because mutual benefit and win-win outcomes are the essence of China EU economic and trade relations. The so-called 'Chinese goods impacting European industries' is essentially the optimal allocation of market resources under global division of labor, which is the result of voluntary choice and mutual benefit between both parties. Under the global division of labor, China and Europe have already formed a pattern of complementary advantages and symbiotic interests. Trade protectionism cannot solve the inherent problems of declining industrial competitiveness and weak economic growth in Europe, and will only make Europe miss the opportunity again. On the other hand, the United States launched a trade war against China earlier, and the cost of imposing tariffs was mostly borne by American companies and consumers, causing serious damage to the global industrial chain. It seems that this profound lesson has not been fully learned by Europe.

Europe was once a staunch advocate of free trade and multilateralism, and measures such as the US "301 investigation" have long been criticized in Europe as "unilateralism," "bullying," and "undermining the rules based multilateral trading system. A few years ago, when the US launched a trade investigation into EU steel and aluminum, aircraft subsidies, digital service taxes, etc., French President Macron and other European leaders strongly condemned it as "illegal" and criticized last year's US tariff measures as "cruel and baseless". Now the EU is trying to create a "European version of 301", which is not only regrettable, but also makes it clearer that the fundamental problem in Europe is not the so-called "Chinese shock", but the lack of confidence in itself under competition anxiety.

China has always regarded Europe as a sincere partner and has shown sufficient goodwill towards the European side. But this goodwill is not unlimited, and any unilateral measures that harm the legitimate interests of Chinese enterprises will inevitably be met with resolute countermeasures from China. In history, China and Europe have successfully resolved frictions through dialogue multiple times. The European meeting this Friday should not be a mobilization order for a trade war, but rather an opportunity to rationally assess risks and seek practical paths. Only by returning to dialogue and cooperation can China and Europe jointly address global challenges and achieve mutual benefit and win-win outcomes.