EU Commission President Ursula von der Leyen holds a news conference after a summit with Chinese President Xi Jinping in Brussels, Belgium, on September 14, 2020. The European Union has more trade leverage over China now than in past years, writes Milton Ezrati. (Shutterstock/Alexandros Michailidis)

Why EU-China Trade Relations Have Deteriorated

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US Tariffs have made China more dependent on the European market for buying its exports.

In the last year or so, trade relations between Europe and China have shifted radically, going from near symbiosis to acrimony and hostility. The change is no accident. It has emerged out of a confluence of otherwise unrelated developments that have at once put Europe on its back foot and at the same time given it leverage with Beijing that it previously lacked.

For some time until recently, both the Europeans and the Chinese were delighted with trade arrangements. The Chinese public and businesses seemed to have a voracious appetite for European products, while European consumers welcomed a full flow of attractively priced Chinese goods. The trade balance tipped against Europe but was manageable. 

At times the Europeans complained about Chinese government subsidies to exporters and other objectionable trade practices but nowhere near the intensity or decibel level of Washington’s complaints. European industrialists, enjoying highly profitable business operations in China, restrained anything European Union (EU) negotiators might do to alienate the Chinese authorities. 

Four developments in particular unraveled this rather happy interchange. Beijing’s efforts to upgrade the value added of its manufacturing under the so-called “Made in China 2025” program began to compete successfully with European business operations in China. At the same time, the investments Beijing made under that program outstripped the needs of the domestic Chinese economy, driving Chinese production to go abroad for sales more than ever. Since US hostility to........

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