Europe weighs closer China ties amid Trump’s tariff storm, but risks to industry and politics loom

European Union leaders attend a round table meeting at an EU summit in Brussels - File Photo

As US President Donald Trump unleashes a new wave of tariffs targeting the European Union, the continent finds itself economically vulnerable—with zero growth, high debt, and political instability. Facing the threat of 20% reciprocal tariffs, plus possible 25% levies on autos, some European policymakers are eyeing a deeper trade relationship with China as an alternative to a now-hostile US.

China: a tempting but risky fallback Europe already trades nearly as much with China as with the US, and Chinese officials have recently expressed openness to deepening ties. For Beijing, securing access to the EU’s wealthy single market is vital as its own economy slows and export pressures mount. But analysts warn that a deal with China could come at a steep cost, particularly for Europe’s prized auto and industrial sectors. China’s exports to the EU now exceed imports by over €300 billion ($332 billion), double the gap when Trump began imposing tariffs in 2018.

Economic consequences of tariff escalation If both the US and EU impose 25% tariffs, eurozone growth could drop by a full percentage point over two years, according to Allianz. Already in industrial recession, Europe is less equipped than the US to absorb such shocks, given its thinner corporate profit margins and heavier reliance on exports. Meanwhile, China’s rising industrial output and overcapacity could lead to a flood of cheap goods into Europe, undercutting local manufacturers and triggering deflationary pressure.

Strategic risks and limited gains Despite hopes that a trade pact with China could soften the blow from US tariffs, Europe’s ability to expand exports to China is questionable. “China exports, it doesn’t import,” said Brad Setser of the Council on Foreign Relations, warning that a deal could mean sacrificing Europe’s auto sector. Furthermore, Beijing’s support for Russia’s war in Ukraine, and the appointment of a combative envoy to the EU, suggests that China isn’t in a conciliatory mood.

Green tech investments offer mixed promise Some Chinese firms, such as EV maker BYD and battery giant CATL, have launched factories in Hungary and Spain. But most Chinese goods sold in Europe are still shipped from China, limiting the benefits of local production. Meanwhile, China is also investing heavily in countries like Turkey and Morocco, which enjoy free trade with the EU but fall outside the bloc’s regulatory oversight.

America still looms large Despite Europe’s frustrations, many analysts believe Trump’s tariff barrage could ultimately push the EU closer to Washington. To defuse tensions, Europe might agree to buy more US gas or defence equipment. Some German engineering firms even view US tariffs on China as a chance to strengthen their market position against Chinese competition.

A delicate balancing act While strengthening ties with China might offer short-term relief from Trump’s protectionism, it carries long-term industrial and geopolitical risks. The EU must now decide whether to seek refuge in Beijing’s embrace—or double down on its transatlantic alliance, even under strain.