Xi seeks detente with Europe as Trump tariffs alienate bloc

President Xi Jinping is seeking to repair ties with the European Union, painting China as the more reliable partner as Donald Trump alienates the bloc over issues from tariffs to defense.

Faced with an effective trade embargo from the U.S., Chinese policymakers and business leaders are searching for new markets in Europe and beyond. To help smooth those ties, Xi is preparing to lift sanctions on several EU lawmakers, according to one European official — a largely symbolic gesture of good will as the measures had little impact.

“As the world’s major economies, China and Europe will jointly safeguard the multilateral trading system,” the Chinese Foreign Ministry said in a statement Thursday, adding that it would welcome more European members of parliament to visit China, without addressing reports on sanctions being lifted.

While leaders in Europe remain fiercely opposed to Beijing’s support for Russian President Vladimir Putin, they’ve indicated a willingness to move forward on some issues. EU officials are considering minimum price quotas on Chinese electric cars, in place of tariffs as high as 45.3% imposed last year over complaints of an export glut.

Such a move would help draw a line under a long-running spat that saw Beijing impose retaliatory levies on French cognac. The conclusion of that process has also been delayed for three months, easing pressure on producers.

At the Shanghai auto show this week, Chinese executives laid out their investment plans in Europe, as exporters across the nation retreat from U.S. markets. Some European counterparts urged a more pragmatic approach to resolving disputes and called to push ahead with closer collaboration.

“Beijing would ideally like to detach Europe from the U.S. and essentially make it a kind of natural shield for China’s ambitions,” said Rana Mitter, ST Lee chair in U.S.-Asia relations at the Harvard Kennedy School. “But while the EU may be wary of America, it’s not going to abandon the American market or its traditional orientation in favor of China, which many regard as extremely unreliable trading partner.”

For years, Europe served as a buffer between the world’s biggest economies, but attitudes in the bloc toward Beijing soured after the coronavirus outbreak fueled a range of diplomatic disputes. That saw European leaders forge a largely unified voice with Washington on “derisking” its economy from China and opposing a flood of cheap exports that threatened jobs.

Trump has eroded that alliance by slapping Europe with a 20% tariff — now reduced to 10% for a 90-day pause — and demanding the EU pays for its own defense while moving closer to Putin. European leaders have made little progress in trying to bridge differences with Trump, despite the EU offering that both sides remove all tariffs on industrial goods.

As the divide deepens, Treasury Secretary Scott Bessent has warned the EU against tightening ties with Beijing, likening such a strategy to “cutting your own throat” when Spanish Prime Minister Pedro Sanchez visited Xi earlier this month pledging greater cooperation.

Reflecting the EU’s desire to rebalance ties, European leaders are now set to travel to Beijing in July for a summit that was expected to be held in Brussels, given that its location rotates. Officials decided to break protocol after Xi reportedly refused to travel to Europe for the talks, which are normally attended by the premier overseas.

One potential aspiration should the summit succeed might be a revival of an investment pact that officials spent seven years negotiating, although that would most likely be a longer term goal. It was axed by Brussels at the 11th hour in 2021, after China retaliated against Western sanctions over human-rights practices in the country’s Xinjiang region by announcing measures against 10 individuals and four entities from Europe.

“If the sanctions were to be lifted by Beijing, I think there would be a willingness to try to ratify the agreement and thereby partly increase trade with China,” Cecilia Malmström, a former European commissioner for trade, now a visiting fellow at the Peterson Institute for International Economics, wrote earlier this month.

The investment pact had been seen as proof of both Europe’s independence from the U.S. and China’s ability to collaborate with American allies who adopted a more moderate approach. For the 27-nation bloc, the pact would have expanded access to the Chinese market while giving Beijing some protection from a hardening stance toward Chinese investment in Europe.

Since then, the trade relationship with the EU has changed so much it would be “difficult” to bring the agreement into force, said Wang Yiwei, professor of international relations at Renmin University. Some areas could be unilaterally applied by China on European member states, he added, citing e-commerce, EVs and data transfer as areas for future cooperation.

European Commission President Ursula von der Leyen said earlier this month in a call with Premier Li Qiang that the two sides should hold a high-level dialogue on economic, trade, green and digital cooperation as soon as possible. China’s Commerce Ministry vowed Beijing was ready to “deepen practical cooperation” with the EU, in order to “maintain the stability and smoothness of global industrial and supply chains.”

Nevertheless, Trump’s tariffs bring worries that Chinese goods meant for the U.S. may be diverted to the EU. A “realistic” assumption might be that one-third of the goods bound for the U.S. get redirected, Eurizon strategists Stephen Jen and Joana Freire wrote in a Tuesday note. That would involve a 70% explosion in China’s surplus with the EU, to some $420 billion.

A report by the European Union Chamber of Commerce in China this month called on Beijing to revise its industrial policies to avoid further backlash. “We are today in a situation where China needs to really rethink the way that it engages with the rest of the world,” said Jens Eskelund, president of the chamber. “Industrial policy needs to be changed.”

Despite the lingering differences, both China and Europe have strong incentives to reach a resolution to their trade issues on EVs, said Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies.

“The fact that the Europeans seem eager about this summit and are traveling to Beijing for it tells me they are really hoping to resolve this in some way,” she added.

_____

(With assistance from Jing Li, Richard Bravo and Kevin Whitelaw.)

_____