Between Trump tariffs and China charm, EU rethinks trade strategy

As Beijing offers investment incentives and Trump threatens tariffs, the EU walks a diplomatic tightrope to protect its economic interests on both fronts

The European Union is entering a critical phase in its diplomatic strategy as it tries to strike economic deals with both China and the United States, two rival superpowers with increasingly incompatible agendas, and with both the EU has been at crossroads. Caught between Beijing’s charm offensive and Washington’s hardline stance, the bloc faces the tough task of extracting trade concessions from both without alienating either, reported the South China Morning Post (SCMP).

 

EU leaders have long warned of the “hyper-competitive and hyper-transactional” nature of the new geopolitical order. That warning now appears to be unfolding in real-time as Brussels prepares to sit across the table from both Washington and Beijing, hoping to secure carve-outs for its industries in an escalating trade environment.

 

 

China signals thaw with sanctions rollback and EV trade proposal

 

Beijing has recently stepped up its efforts to woo Europe, rolling back sanctions on EU lawmakers as a goodwill gesture and hinting at reviving the stalled Comprehensive Agreement on Investment (CAI). The pact, signed in 2020, was frozen by the European Parliament after China imposed retaliatory sanctions over EU criticism of alleged human rights abuses in Xinjiang.

 

China’s move this week to drop sanctions on sitting lawmakers signals its willingness to rekindle economic ties, but EU officials remain cautious. Sanctions still remain on other key figures, including researchers and diplomats, casting doubt on whether the investment pact can move forward, the report stated.

 

In parallel, a new trade formula is being floated, a potential deal where China sets a floor price on electric vehicle exports in exchange for the EU softening its anti-subsidy duties. The report cited EU sources as saying such a quid pro quo could also include commitments from China to address industrial overcapacity and invest in the European EV supply chain to create jobs and transfer high-end technology.

 

Despite overtures, Brussels leans toward US amid trade fears

 

Despite Beijing’s overtures, Brussels appears to be leaning toward Washington. According to a Politico report, top EU officials recently told diplomats they were ready to work with the US on countering China’s trade practices as part of a package aimed at avoiding severe American tariffs.

 

Trade with the US may be prioritised over that with China because the EU exported twice as much to America last year, giving Brussels a strong incentive to stay in Washington’s good books. The bloc now hopes that aligning with the US on China-related concerns, particularly on trade barriers and overcapacity, could help cushion the blow from Donald Trump’s threatened tariffs.

 

EU walks diplomatic tightrope to avoid alienating superpowers

 

However, any perception of siding with one power risks damaging ties with the other. EU diplomats fear that if Washington and Beijing make a bilateral breakthrough, the bloc could be left out in the cold. Officials cited by SCMP described the current moment as a “high-wire act,” where Europe must maintain delicate neutrality while pursuing strategic interests.

 

The EU’s challenge is further compounded by the internal dissonance among its 27 member states. Presenting a unified position is proving increasingly difficult as national priorities diverge, a vulnerability that both the US and China are keen to exploit.

 

Europe’s middle-ground strategy offers both leverage and risk

 

While the EU’s position between two feuding superpowers brings risks, it also provides leverage. By appearing open to both, Brussels aims to extract the best possible terms from each. This transactional approach is enabled by China’s shaky economic outlook and the US’s desire to build a broad anti-China coalition.

 

But observers warn that Europe’s strategy hinges on more than just good timing, it will require deft diplomacy, transparency in technical negotiations on tariffs and trade monitoring, and above all, cohesion among member states.