EU Urges China to Avoid Escalating Trade Tensions

At a recent summit, the European Union (EU) expressed serious concerns about the potential escalation of trade conflicts with China. Following the implementation of additional tariffs on Chinese electric vehicles last year, the EU has been vocal about the unfair advantages that Chinese manufacturers enjoy due to government subsidies. These subsidies allow Chinese electric cars to be sold at prices approximately 20% lower than their European counterparts.

The EU's warnings come in the context of a trade deficit of EUR305 billion with China in 2024, characterized by a significant imbalance in trade relations. The EU has pointed out not only the issue of unfair subsidies but also the growing overcapacity in production and challenges faced by European companies trying to access the Chinese market.

China's economic leverage over Europe stems from its control over crucial supplies such as rare earth elements and permanent magnets, which are essential for various industries, including electric vehicle production. In retaliation to the EU's tariffs, China has imposed countermeasures affecting European exports of spirits, pork, and dairy products. Efforts to resolve these trade disputes amicably have thus far yielded no substantial results.

Furthermore, the EU has called on China to take concrete steps to facilitate access for European businesses to the Chinese market, particularly in sectors like meat, cosmetics, and pharmaceuticals. Amid rising concerns over China's export controls on rare earth elements, the EU has initiated a new mediation mechanism with Beijing. This mechanism aims to establish a more efficient export delivery system, ensuring that supply issues can be addressed promptly.

Ursula von der Leyen, President of the European Commission, emphasized the need for China to demonstrate reliability in supplying critical raw materials. Since April, China has enforced export controls on seven rare earth elements and related magnets, requiring companies globally to navigate a complex application process to secure these vital resources.

In addition to trade matters, the summit also addressed geopolitical issues, including the ongoing Russian aggression against Ukraine. The EU reiterated its stance urging China not to provide any form of material support that could bolster Russia's military capabilities. Concerns regarding human rights violations in regions such as Xinjiang and Tibet were also raised by EU representatives during the discussions.