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EU trade with China is hard to "de-risk"

Recent EU imports of sensitive technology and vital minerals from China have surged despite politicians' attempts to “de-risk” commercial relationships amid deteriorating political relations with Beijing. In 2019, Brussels called China a “systemic rival” after trade tensions rose. Eurostat data reveals that the world's greatest exporter's commodities almost quadrupled in value between 2018 and 2022. China was the EU's greatest supplier of products in the first half of this year. An OECD investigation indicates imports of phones, computers, and machinery have increased substantially despite EU authorities' fears that China may exploit the technology to steal national secrets. China supplies the EU's most rare earths and other important raw materials. 

However, OECD data suggest the US has made far more progress in becoming less dependent on its primary economic opponent.

US Trade data reveal that Chinese imports plummeted from 21% to 16% between 2018 and 2022, when then-president Donald Trump placed 25% tariffs on $34bn of Chinese imports.

Despite a more cooperative tone, President Joe Biden has not eased trade restrictions, and Census Bureau data shows sustained decreases this year.

US firms' links may be closer than government data implies. To comply with the taxes, Chinese suppliers have transferred sections of their operations abroad in Asia.

After Beijing dropped tariffs on Europe in reaction to the US trade war, several commentators believed the EU filled the gaps. European automobile sales to China have increased since US businesses were banned. The partnership was €24bn last year. The growth of Chinese carmakers, who are gaining European market share at home and abroad, may be the biggest challenge to this enterprise. 

France has responded by limiting EV subsidies to producers' emissions, which would hurt Chinese carmakers that use coal-powered electricity. Last month, German foreign minister Annalena Baerbock warned automakers to lessen their dependency on China or “bear more of the financial risk themselves” under its “de-risking” policy. “The debate in Germany is shifting quite rapidly towards a much more critical and concerned attitude towards trade and investment in China,” said Chatham House Global Trade Policy Forum project director Marianne Schneider-Petsinger. "But at the same time, firms on the ground and the government differ."





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