Market conventions: China and the EU may join forces in a trade war against the United States

The European Union and China have begun negotiations on setting minimum prices for Chinese-made electric vehicles instead of duties. This was reported by Reuters on April 11, citing a representative of the European Commission. The EU introduced tariffs in October 2024, and in some cases they reach 45% above the standard import duty of 10%. In particular, BYD charges 17% for electric vehicles, 18% for Geely, and 35% for SAIC.

At the beginning of the year, China appealed to the EU court over these duties. However, changes can happen right now — against the backdrop of a large-scale US trade war against most countries of the world.

On April 2, Donald Trump announced the introduction of import duties against 185 countries: the base rate is 10%, but for large countries it is much higher. At the same time, on April 9, Trump postponed the entry into force of increased fees for some of them for 90 days, as the countries turned to him for negotiations. The only one who has taken a really tough stance is China.

China and the United States have announced several increases in import duties against each other over the past week. By April 11, the United States had increased tariffs to 145%, and China to 125%. The Ministry of Commerce of the People's Republic of China has already called mutual fees a "numbers game" that has no practical significance. In fact, they can be considered defensive.

Meanwhile, China is publicly suggesting that European countries unite to protect their interests and international rules in order to resist intimidation from the United States. This was stated by Communist Party Chairman Xi Jinping at a meeting with Spanish Prime Minister Pedro Sanchez on April 11.

"Friendship between China and the West is the right choice made by the two peoples based on traditional friendship, real needs and long—term interests," Xi Jinping said.

He also added that China has always considered the EU to be an important pole in a multipolar world. And also that there are no winners in tariff wars — going against the world means isolating yourself.

What has been the relationship between China and the EU in recent years?

In recent years, relations between China and the EU have remained tense. The main reason for the economic disputes were Chinese electric cars, which literally flooded the European market. Back in 2023, the European Commission initiated an investigation, suspecting that China was artificially lowering prices through large-scale government subsidies. Then came the duties.

In response, the Chinese government filed a lawsuit against the European Union. In addition, Beijing has initiated an investigation into imports of meat and dairy products from the EU.

On the part of Europe, the replacement of duties with minimum prices is an unambiguous concession in relation to China, explained Natalia Milchakova, analyst at Freedom Finance Global. However, at least for now, it is unlikely that this will significantly affect the trade turnover: if in 2024 it increased by 0.4%, then in 2025, after the abolition of duties, it may increase by 0.6-0.8%.

"The share of the total GDP of China and the EU in the global economy will continue to grow and may increase from the current 30% (17% + 13%, respectively) in nominal terms to 31-33% in the coming years," estimated Kirill Seleznev, an expert on the Garda Capital stock market.

If we talk about GDP at purchasing power parity (it takes into account the exchange rate — that is, it accurately reflects how many goods and services a country produces), the total share of China and the European Union may grow from the current 38% (19% + 19%, respectively) and exceed 40% of the global economy, the expert estimated.

On the other hand, a large—scale unification of the EU and Chinese economies looks doubtful, according to Kirill Kononov, an analyst at BCS World of Investments, as they have recently become increasingly competitors in the markets of automobiles, industrial machinery, and consumer goods. Rather, we can talk about the selective integration of European manufacturers into China's production chains and the partial opening of markets for each other's products, he believes.

— Nevertheless, there are points of contact. If China's economy increasingly focuses on domestic consumption, the EU may expand access to this market. Europe is also interested in access to relatively cheap energy and labor, which China has," Kirill Kononov added.

Finally, through the Asian market, European companies can gain access to Russian and other markets where the EU authorities have imposed trade restrictions, the expert believes.

How will economic relations between China and the EU change

Despite the differences, the general concern about the actions of the United States may contribute to the normalization of relations between China and the European Union in the near future, experts say.

— Potentially, the joint struggle of the parties against US trade barriers can lead to increased trust between the parties. U.S. tariffs are an equal headache for both Europeans and Chinese. This artificially creates a field for European-Chinese rapprochement," said Lolita Koroleva, a junior researcher at the Center for Comprehensive European and International Studies at the National Research University Higher School of Economics.

This is evidenced by the increasingly frequent contacts between the countries, she noted. At the end of March, European Commissioner for Trade and Economic Security Maros Sefcovic traveled to China to meet with Commerce Minister Wang Wentao and Vice Premier of the State Council of the People's Republic of China He Lifeng. On April 11, Xi Jinping met with Spanish Prime Minister Pedro Sanchez in Beijing. In addition, there is news about the upcoming EU-China summit in July 2025 on the issue of "clock reconciliation" regarding US duties.

— Now, in the context of the trade war unleashed by Trump, Brussels is thinking that they need to look for a new ally or even an economic "patron" capable of competing with the United States. And such a "patron" can only be China, as the world's second economy in terms of nominal GDP and the first in terms of GDP calculated at purchasing power parity, says Natalia Milchakova from Freedom Finance Global.

Regardless of the interaction between the EU and China, in the coming years, maintaining tariffs at the level announced by Trump will lead to a recession in the United States, Kirill Seleznev from Garda Capital summed up. And for Russia, as an export-oriented country, the potential reorientation of the EU towards more open trade with China opens up new export opportunities.