Global trade remains unstable because of the war with Iran, the closing of the Strait of Hormuz, and continuing unpredictable threats from the White House. The uncertainty dominates many corporate board discussions. In the hope of creating some breathing space for Europe, the Turnberry deal—in which the United States limits tariffs on Europe to 15 percent in return for Europe eliminating tariffs on US agricultural and industrial goods, including cars—will enter into force in early June.
But now Europe needs a coherent, updated strategy toward an ever more aggressive China. So far, unfortunately, its dealings with the country have been marked by lack of unity and conflicting messages.
The European Union is avoiding escalation with Washington
Since President Donald Trump’s “Liberation Day” tariffs of last year, the European Union sought to bring stability and predictability to its trade relations with Washington. The challenge was made more difficult by new tariff threats related to Greenland, Europe’s refusal to assist the United States in its war on Iran, and recently tariffs on cars. The Turnberry agreement, named after the Scottish coastal town where it was first reached, has been caught up in disputes, marked by the European Parliament introducing new amendments and safety clauses that the member states´ ministers did not accept. A compromise has now been reached and will be voted and confirmed shortly.
Meanwhile, to its credit, the European Union is pursuing other trade opportunities. The EU accord with Mercosur (including Argentina, Brazil, Paraguay, and Uruguay) entered into force on May 1. Agreements with Indonesia, Mexico, India, and Australia have similarly been concluded and are awaiting signature. Talks with Thailand, Malaysia, and the Philippines are said to be at an advanced stage. Negotiations with India had been going on for 25 years and are now finally concluded, just waiting for ratification. It will create the biggest free trade agreement ever in terms of population, including 2 billion people. The closing of all these agreements was done with the geopolitical situation in mind, bridging former disagreements.
Similarly, closer cooperation in trade, investment, customs procedures facilitation, and other steps are developing between the European Union and the 12 countries of the Comprehensive and Progressive Transpacific Partnership, CPTPP. All these deals seek to diversify, derisk, and secure value chains away from the United States. On China however, the European Union is failing.
Chinese industrial pressures make Europe nervous
The European Union and China are important trading partners. China is the European Union’s third largest trading partner for goods and services after the United States and the United Kingdom. But its trade deficit with China is growing and is now at €360 billion. China is the largest source of European imports. Nobody questions the importance of trading with China; the discussion is how and under what conditions.
For example, the European Union, like many other countries, is heavily dependent on Chinese owned or controlled rare earths and minerals. The newly concluded trade agreements with partners other than China include provisions for deepened cooperation in this sector. But the current dependence on China cannot change overnight.
A separate problem is that China’s increasingly aggressive trade policy is hurting EU industry. China seems to be entering a new phase of industrial policy with an increase of targeted subsidies, dumping, and overproduction as strategies to increase exports. But the country is also becoming globally competitive in Europe´s manufacturing sectors, including cars, pharmaceuticals, electronics, chemicals, and medical devices, among others.
The European Commission has steadily increased its use of anti-dumping measures to protect its industries from subsidized Chinese imports. In 2024 Europe lodged seven cases against China. In 2025 the number grew to 17 cases, and there are more than 50 ongoing cases this year. Duties or tariffs have been imposed on Chinese electric vehicles, solar supply chains, steel cylinders, valines, glass fibers, and other products. Each decision is made after a thorough investigation, which sometimes can take up to 18 months, and a majority of the member states need to approve the measure.
But Europe lacks a vision on how to deal with China in a comprehensive manner, with an economic security lens. The European Union has been struggling to find a common position. Individual political leaders such as German chancellor Friedrich Merz, Spanish prime minister Pedro Sánchez, and French president Emmanuel Macron have all visited China in the last year. The German minister of economy was there this month. But they have been speaking with varied voices lacking a unified approach.
The EU member states are discussing the European Commission´s new industrial strategy proposal, the Industrial Accelerator Act, which would exclude certain countries from public procurement bids in some sectors and from access to subsidies in supply chains, aiming to have them “made in Europe.” But member states disagree on whether China should be excluded or not.
Five hardline oriented countries (France, Spain, the Netherlands, Italy, and Lithuania) have sent a joint letter to the Commission, asking for tougher measures against China, including more targeted trade defense tools and quicker investigations. Germany, however, has refused to cosign and is instead calling for strengthened industrial ties with China. Several countries, mainly in Scandinavia, share Germany´s view. This heterogenous approach is hurting the European Union´s credibility.
The European Commissioner for the Single Market, Stephane Séjourné, recently announced that the European Union will use more safeguard clauses to protect European industries. At a recent Commission meeting specifically dedicated to discussing China, President Ursula von der Leyen stated that the European Union’s approach is still “de-risking,” not decoupling from China but that the economic and security interests have been more intertwined and require a more robust and coherent response. Also, there is disagreement within the college of Commissioners, with its president pushing for a tougher line. The topic will be further discussed at the next Group of 7 (G7) meeting and in a European Council, with all prime ministers, in mid-June.
Europe needs a new China strategy
All these actions and discussions point to the urgent need of a comprehensive and updated joint strategy towards China. The current one is from 2019, written at a time of hope that the EU-China Investment partnership, CAI, would materialize. The strategy was adopted in 2020 after a strong push by Germany, but it was frozen by the European Parliament in response to China sanctioning 20 EU citizens, including a few members of the European Parliament. China’s sanctions, in turn, were a response to G7 sanctions on two Chinese civil servants responsible for human rights abuses in the Xinjiang province. As a result, the CAI never entered into force.
Reflecting its own confusion, the strategy from 2019 called China a “strategic partner,” “an economic competitor,” and a “systemic rival promoting alternative models of governance.” The world has changed since then, further soured by China´s support for Russia´s aggression in Ukraine on top of its industrial policy. The fear is that for some sectors, it might be too late for Europe to catch up. For instance, there are basically only Chinese produced buses on the streets of Europe.
To be sure, uniting 27 member states around a joint approach will be hard. But the European Council should put in the effort and give it a serious try. Europe needs to balance openness and the need for Chinese technology with protecting European industry from unfair cooperation. And the security dimension, not least in the area of rare earths and critical raw materials, must be included.
In some of these policies cooperation with the United States, building on the strategy on critical minerals, should be possible. The European Union should also deepen its cooperation with partners in the CPTPP to build up common anti-coercion measures and a strategy on how to use them against any coercive power, whether from China or the United States. Ideally, joint standards on rules of origin should also be elaborated. The European Union is showing geopolitical leadership with the new trade agreements and partnership building with middle powers and others. It must maintain that credibility by adopting a targeted common strategy on China. It will not work with 27 different versions.