Europe and China to hold trade talks; low expectations for major agreements

Business Standard

24-07-2025

European leaders are meeting with top Chinese officials in Beijing on Thursday to discuss trade, climate change and global conflicts, with observers saying expectations were low for any solid agreements.
The talks, initially supposed to last two days but scaled back to one, come amid financial uncertainty around the world, wars in the Middle East and Ukraine, and the threat of US tariffs. Neither the EU nor China is likely to budge on key issues dividing the two economic juggernauts.
European Commission President Ursula von der Leyen and European Council President Antnio Costa will meet with Chinese President Xi Jinping and Premier Li Qiang to mark 50 years of relations between Brussels and Beijing.
Von der Leyen and Costa were expected to challenge China's strategies on a number of issues during the talks. They include Beijing's position on Russian President Vladimir Putin's full-scale invasion of Ukraine; and China's trade imbalance with the EU, persistent cyberattacks and espionage, a near-monopoly of rare earth minerals and its human rights record in Tibet, Hong Kong and Xinjiang.
The EU, meanwhile, has concerns about a looming trade battle with the United States.
Europe is being very careful not to antagonize President Trump even further by looking maybe too close to China, so all of that doesn't make this summit easier, said Fabian Zuleeg, chief economist of the European Policy Center. "It will be very hard to achieve something concrete.
There's also unlikelihood of a major breakthrough amid China's hardening stance on the EU, despite a few olive branches, like the suspension of sanctions on European lawmakers who criticized Beijing's human rights record in Xinjiang, a region in northwestern China home to the Uyghurs.
China believes it has successfully weathered the US tariffs storm because of its aggressive posture, said Noah Barkin, an analyst at the Rhodium Group think tank. Barkin said that Beijing's bold tactics that worked with Washington should work with other Western powers.
"China has come away emboldened from its trade confrontation with Trump. That has reduced its appetite for making concessions to the EU," he said. Now that Trump has backed down, China sees less of a need to woo Europe.
China is the EU's second-largest trading partner in goods, after the United States, with about 30% of global trade flowing between them. Both China and the EU want to use their economies ties to stabilize the global economy, and they share some climate goals.
But deep disagreements run through those overlapping interests.
Division on trade
China and the EU have multiple trade disputes across a range of industries, but no disagreement is as sharp as their enormous trade imbalance.
Like the US, the 27-nation bloc runs a massive trade deficit with China around 300 billion euros ($350 million) last year. It relies heavily on China for critical minerals, which are also used to make magnets for cars and appliances. When China curtailed the export of those minerals in the wake of US President Donald Trump's tariffs, European automakers cried foul.
The EU has tariffs on Chinese electric vehicles in order to support its own carmakers by balancing out Beijing's own heavy auto subsidies. China would like those tariffs to be revoked.
The rapid growth in China's market share in Europe has sparked concern that Chinese cars will eventually threaten the EU's ability to produce its own green technology to combat climate change. Business groups and unions also fear that the jobs of 2.5 million auto industry workers could be put in jeopardy, as well those of 10.3 million more people whose employment depends indirectly on EV production.
China has also launched investigations into European pork and dairy products, and placed tariffs on French cognac and armagnac. They have criticized new EU regulations of medical equipment sales, and fear upcoming legislation that could further target Chinese industries, said Alicia Garca-Herrero, a China analyst at the Bruegel think tank.
In June, the EU announced that Chinese medical equipment companies were to be excluded from any government purchases of more than 5 million euros (nearly $6 million). The measure seeks to incentivize China to cease its discrimination against EU firms, the bloc said, accusing China of erecting significant and recurring legal and administrative barriers to its procurement market.
European companies are largely seeing declining profitability in China. But the EU has leverage because China still needs to sell goods to the bloc, Garca-Herrero said.
The EU remains China's largest export market, so China has every intention to keep it this way, especially given the pressure coming from the US, she said.
It was unclear why the initial plan for the summit of two days was curtailed to just one in Beijing.
War on Europe's doorstep
The clear majority of Europeans favor increasing aid to Ukraine and more sanctions on Russia.
The latest sanctions package on Russia also listed Chinese firms, including two large banks that the EU accused of being linked to Russia's war industry. China's commerce ministry said that it was strongly dissatisfied with and firmly opposed to" the listing and vowed to respond with necessary measures to resolutely safeguard the legitimate rights and interests of Chinese enterprises and financial institutions.
Xi and Putin have had a close relationship, which is also reflected in the countries' ties. China has become a major customer for Russian oil and gas, and a source of key technologies following sweeping Western sanctions on Moscow. In May, Xi attended a Victor Day celebration alongside Putin in Moscow, but didn't attend a similar EU event in Brussels celebrating the end of World War II.
Von der Leyen and Costa will press Xi and Li to slash their support of Russia, but with likely little effect.
Beyond Beijing and Washington
Buffeted between a combative Washington and a hard-line Beijing, the EU has more publicly sought new alliances elsewhere, inking a trade pact with Indonesia, heaping praise on Japan and drafting trade deals with South America and Mexico.
We also know that 87% of global trade is with other countries many of them looking for stability and opportunity. That is why I am here for this visit to Japan to deepen our ties, Von der Leyen said in Tokyo during an EU-Japan summit on her way to Beijing.
Both Europe and Japan see a world around us where protectionist instincts grow, weaknesses get weaponized, and every dependency exploited. So it is normal that two like-minded partners come together to make each other stronger." Promoting ties with Europe is one third of Japan's new 2025 military doctrine, after sustaining defense links with the US and investing in capabilities at home like missiles, satellites, warships, and drones.