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China-US Trade Tensions: Where Does Europe Stand?

October 26, 2021

 

The US and China have been embroiled in a tense battle over trade for the last few years, placing Europe in a strategic dilemma between the two superpowers. The sheer size of the US and Chinese economies means that the stakes are high, and Europe needs to choose a side that will ensure as little disruption to the status quo as possible.

 

On the one hand, the US is an important market for EU exports, and its military offers security against any threats to the continent. However, China became the EU’s largest trading partner in 2020, and it remains an important part of Europe’s economic strategy.

 

As the tension between the two nations builds, both are hoping that Europe’s balancing act will come to an end. But, its neutral stance is the safest option it has at the moment. Can it last?

 

In this article, we’ll explore what led to the China-US trade tensions, analyse Europe’s relations with the US and China, and examine what Europe’s next steps will be.

What Led to the China-US Trade Tensions?

The so-called trade war between China and the US began in 2018 when the US administration began setting tariffs and trade barriers on China in order to force it to make changes to what the US called ‘unfair trade practices’. It was claimed that these practices were leading to the US-China trade deficit. In retaliation to the accusations, China imposed import duties of its own on US products. 

 

Although a temporary resolution was found in 2020, trade tensions persisted to the detriment of both nations. In the US, the trade war led to higher costs for manufacturers, higher prices for consumers and financial difficulties for farmers. Meanwhile, in China, the trade war contributed to a slowdown in economic and industrial output growth.

Three years on, the US-China trade war rages on, with hefty tariffs remaining on Chinese goods and the current US administration urging China to uphold the trade commitments agreed in 2020 (so far, China is on a pace to fall short of its 2021 purchasing commitments by more than 30%).

Europe’s Position Between the US and China

It is unsurprising that Europe is taking a cautious approach to the trade war between the US and China. Its relationship with both major powers brings it invaluable benefits: the long-standing security arrangement with the US provides stability and protection against any threats, while China’s economic expansion provides European countries with huge opportunities for growth.

 

However, as the situation remains polarising, Europe is stuck in the middle, with Chinese and US leaders hoping to gain its backing. We’ve analysed Europe’s relations with China and the United States below:

Europe and China

Culturally speaking, Europe and China share little in common. China’s confrontational diplomatic style and treatment of its own citizens have caused European countries to grow wary of its growing role on the world stage in recent years. 

 

These rising tensions accelerated since the end of 2020, with Europe imposing sanctions on China and condemning cyberattacks by Chinese-based hackers. The EU even froze a huge trade deal with China due to its treatment of Uyghurs in the country — a clear message from Europe that human rights are not for sale.

 

However, on the flip side of the coin, jeopardising ties with the nation would go against any economic sense for the continent, particularly in view of its growing impact on exports and imports. 

Europe and the US

Europe and the US have been long-standing allies on the world stage in both trade and security.

 

It’s no secret that they experienced a rather shaky four years when America withdrew from the Iran nuclear deal and UN Human Rights Council, for instance. The US government’s ‘America First’ strategy did little to soothe the worries of European leaders. 

 

Nevertheless, the Biden administration appears to be making more of an effort with the continent. Yet, the elephant in the room remains: China.

 

Biden has encouraged Europe to join the US in its coalition to counter China over its crackdown on the pro-democracy movement in Hong Kong, repression of Uyghurs, aggressive military activity in the South and East China seas, and the use of economic coercion. 

 

However, the US has failed to lay out what a Europe competing with China would look like. If Europe were to take a confrontational stance in the relations against China, the US needs to address issues like trade and strategic autonomy.

Next Steps for Europe in the US-China Trade Tensions

Europe is unlikely to make a snap decision in its stance in the US-China trade tensions. It is trying to juggle foreign relations, business interests, standards and values to ensure as little disruption to the economic landscape as possible. Adding to the complexity of the situation, member states within the EU also have their own interests to look after, which could make it difficult for Europe to align with either China or the US.

 

However, with Europe growing wary of China, it is likely that it will continue its gradual downhill grind against it in the future. Whether this will be sustainable in the long-term is another question, given the polarising pressure coming from both the US and China.

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