The global economic landscape is shifting rapidly, with the United States and China engaged in a high-stakes trade war that has reverberated across continents. Europe, caught in the crossfire, faces a complex dilemma: are the policies of these two economic giants pushing the European Union (EU) toward a losing position?
The Context: A Fractured Global Trade Order
The resurgence of protectionism, led by U.S. President Donald Trump’s aggressive tariff policies in 2025, has upended decades of global trade norms. According to recent data, U.S. tariffs on Chinese goods have soared to an average of 127.2% as of May 2025, with reciprocal tariffs from China reaching 147.6% before a partial de-escalation to 32.6% following negotiations in Geneva. The EU, meanwhile, faces U.S. tariffs ranging from 15% to 20% on its exports, with specific sectors like automobiles and steel hit by levies as high as 25% and 50%, respectively. These tariffs, justified by the U.S. under the guise of addressing trade imbalances and national security, have sparked fears of a global trade war, with Europe potentially bearing significant collateral damage.
At the same time, EU-China relations have deteriorated, as evidenced by the lackluster EU-China Summit in Beijing in July 2025. Intended to celebrate 50 years of diplomatic ties, the summit instead highlighted deep-seated frictions, with no significant breakthroughs on trade or geopolitical issues. The EU’s labeling of China as a “systemic rival” since 2019, combined with its alignment with U.S. policies, has strained a once-robust economic partnership. Yet, the EU remains China’s largest trading partner, with bilateral trade in goods reaching €732 billion in 2024, underscoring the stakes involved.
Are U.S. Tariffs Pushing Europe Toward China?
The notion that U.S. tariffs might drive Europe closer to China stems from the idea that shared economic pressures could foster cooperation between the EU and China as a counterweight to U.S. unilateralism. Some analysts argue that the EU, facing a 20% U.S. tariff on its exports, might seek to deepen ties with China to offset losses in the American market. For instance, Chinese officials have expressed a willingness to negotiate on issues like electric vehicle (EV) pricing and market access, signaling potential for collaboration.
However, the reality is more complex. While China has positioned itself as a proponent of free trade and multilateralism, the EU’s strategic alignment with the U.S. and internal divisions have hindered a meaningful pivot toward Beijing. The EU’s recent actions—imposing tariffs on Chinese EVs, restricting Chinese firms from public tenders worth over €5 million, and sanctioning Chinese banks over Russia-related issues—suggest a hardening stance rather than a warming of relations. At the Beijing summit, European Commission President Ursula von der Leyen and EU diplomacy head Kaja Kallas reiterated concerns about China’s trade practices and its ties with Russia, further dimming prospects for a reset.
China, for its part, sees the EU’s predicament as an opportunity to gain leverage. Beijing has emphasized complementary economic goals, such as cooperation in green technology and digital transformation, but it has also retaliated against EU measures. For example, China imposed curbs on European medical device purchases in response to the EU’s restrictions on Chinese firms, signaling its readiness to escalate trade disputes. Moreover, China’s control over critical minerals and rare earths, essential for industries like clean tech and semiconductors, gives it significant bargaining power, which it has not hesitated to wield.
Rather than pushing Europe toward China, U.S. tariffs seem to have trapped the EU in a strategic bind. The bloc’s efforts to “de-risk” by reducing dependence on Chinese supply chains align with Washington’s containment strategy, yet they undermine Europe’s economic competitiveness. Meanwhile, China’s growing self-sufficiency and export diversification—particularly to Southeast Asia and developing nations—mean it is less dependent on the EU than vice versa. This asymmetry weakens Europe’s negotiating position and makes a significant rapprochement unlikely in the near term.
The new wave of U.S. tariffs, combined with strained EU-China relations, is inflicting measurable harm on European economies. Below are the key ways European countries are being affected:
Direct Economic Impact of U.S. Tariffs
U.S. tariffs, including a 20% reciprocal levy and a 25% tariff on vehicles, are projected to reduce EU GDP by approximately 0.3 percentage points in 2025, a significant but not catastrophic hit compared to past shocks like COVID-19 (-5.6%) or the energy crisis (-2.4%). However, specific sectors and countries are disproportionately affected. Ireland, with its heavy reliance on U.S. exports (21% of extra-EU exports), faces risks to its pharmaceutical and tech industries. Italy, the second-most exposed, is vulnerable in transport equipment, fashion, and pharmaceuticals. These tariffs increase costs for European exporters, reduce U.S. demand for their goods, and threaten job losses in key industries.
Trade Diversion and Chinese Overcapacity
U.S. tariffs on Chinese goods, reaching as high as 145% in 2025, are diverting Chinese exports to Europe, exacerbating the EU’s trade deficit with China, which was €292 billion in 2023 and is projected to double by 2025. An 8.2% surge in Chinese exports to the EU in April 2025, attributed to diverted goods, has raised fears of dumping artificially cheap products like EVs, steel, and consumer electronics. This threatens European industries, particularly automotive and clean tech, which face intense competition from subsidized Chinese firms. The EU has responded with an Import Surveillance Task Force to monitor dumping and impose anti-subsidy measures, but these may not fully mitigate the impact.
Retaliatory Measures and Escalating Tensions
The EU’s own tariffs on Chinese EVs (prompted by a 2024 investigation into state subsidies) and restrictions on Chinese firms have triggered retaliatory measures from Beijing, such as duties on European brandy and curbs on medical device imports. These tit-for-tat actions risk escalating into a broader trade conflict, further straining European exporters. For instance, Germany, with its deep economic ties to China, faces potential retaliation that could disrupt its automotive sector, while France’s agricultural exports are already feeling the pinch.
Supply Chain Disruptions and Dependency Risks
The EU’s push for “de-risking” by diversifying supply chains away from China has increased costs and disrupted established networks. China’s control over rare earths and critical minerals, vital for green technology and high-tech industries, remains a choke point. Recent Chinese restrictions on rare earth exports, in response to U.S. tariffs, have heightened concerns about supply chain vulnerabilities, particularly for European manufacturers of EVs, wind turbines, and semiconductors.
Geopolitical and Economic Isolation
The EU’s alignment with U.S. policies, coupled with its failure to secure concessions from China, risks isolating it geopolitically and economically. While the EU seeks “strategic autonomy,” its actions—such as sanctioning Chinese banks over Russia—tie it closer to Washington’s agenda, alienating Beijing and other global partners. This inward-looking approach, combined with internal divisions (e.g., Germany’s skepticism of EV tariffs versus France’s support), undermines the EU’s ability to shape global norms or compete effectively.
Europe’s Self-Inflicted Decline?
The EU’s current trajectory—marked by “de-risking” policies, alignment with U.S. strategies, and a failure to capitalize on China’s overtures—raises the question of whether Europe is losing not just from U.S. and Chinese actions but from its own strategic missteps. The Beijing summit underscored this dilemma: while China advocated for cooperation in areas like AI, clean energy, and infrastructure, the EU remained fixated on trade imbalances and geopolitical grievances, missing opportunities for mutual benefit.
Economically, the EU’s trade relationship with China remains vital. With €732 billion in bilateral trade and €65 billion in Chinese investment stock in the EU as of 2023, the partnership is a cornerstone of global commerce. Yet, the EU’s ideological shift since 2019, labeling China a “systemic rival,” has introduced suspicion that stifles cooperation. By prioritizing security over pragmatism, the EU risks undermining its competitiveness, particularly in green and digital technologies where China leads.
Geopolitically, the EU’s insistence on pressing China over Ukraine reflects a miscalculation. Beijing’s neutral stance and focus on stability contrast with the EU’s existential framing of the conflict, which limits diplomatic flexibility. This misalignment, coupled with the EU’s reliance on U.S. security guarantees, weakens its claim to strategic autonomy and leaves it vulnerable to external pressures.
A Path Forward for Europe
Europe is not inevitably “losing” from the U.S.-China trade war, but it is at a crossroads. U.S. tariffs are not pushing the EU toward China as much as they are exposing its strategic incoherence. The new tariff wave is hurting European economies through reduced exports, trade diversion, and supply chain disruptions, but the deeper damage stems from the EU’s own policies—over-alignment with the U.S., internal divisions, and a failure to engage pragmatically with China.
To avoid self-inflicted decline, the EU must recalibrate its approach:
Pursue Pragmatic Engagement with China: Focus on complementary sectors like green technology and AI, leveraging China’s willingness to cooperate.
Strengthen Internal Unity: Harmonize member states’ approaches to trade and foreign policy to enhance negotiating power.
Diversify Trade Partnerships: Accelerate ties with India, South America, and Southeast Asia to reduce reliance on both the U.S. and China.
Reassess “De-Risking”: Balance security concerns with economic competitiveness to avoid disrupting critical supply chains.
The EU-China relationship, too significant to be defined by ideological posturing, holds the potential to shape global stability. Whether Europe can overcome its anxieties and rediscover pragmatic cooperation with Beijing will determine if it can turn the tide in its favor—or continue to lose ground in a rapidly changing world.
