Alicia Garcia-HerreroandSebastian Contin Trillo-Figueroa

Opinion | Hardening US trade stance on China complicates EU’s balancing act

Punitive US tariffs are driving more Chinese goods into the EU, making its task of safeguarding competition and economic security harder when weighed against the geopolitical realities

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Alicia Garcia-HerreroandSebastian Contin Trillo-Figueroa

Published: 8:30pm, 30 May 2024

The European Union’s targeting of China’s subsidies and industrial overcapacity, aimed at enhancing economic security and ensuring fair competition, may end up aligning more closely with America’s confrontational stance. But the EU is acting not so much under US pressure as to address its loss of market share in both exports and domestic sales.

Earlier this month, the US announced higher tariffs on a range of Chinese goods after a trade investigation. The US, which imports only 2 per cent of its electric vehicles from China, is quadrupling tariffs to 100 per cent. More troubling is its tripling of tariffs on Chinese lithium-ion EV batteries, which will increase costs for manufacturers. Tariffs will also double on Chinese solar panels.

There are three important consequences. Firstly, these US measures could be mirrored by others, and this would have a negative impact on the renewable energy sector by restricting competition, reducing choices and driving up the prices of green goods, thereby hindering the global decarbonisation transition.

Secondly, driven largely by electoral concerns, the latest US moves suggest Washington is returning to decoupling from Beijing, rather than merely “de-risking”. Such a strategy reveals a bipartisan consensus, with both parties vying to adopt the more rigorous stance.

Thirdly, it underscores a deliberate and heightened divergence in economic and trade relations between the two superpowers, amplifying the likelihood of economic and technological bifurcation.

The punitive US tariff increases are a wake-up call for Europe over China’s trade practices and their potential impact. The more the US closes its market to Chinese products, the more China will need to redirect its massive output to the EU, which remains a top export market.