The European Union is bracing for a crucial test as tensions with China continue to escalate, posing significant challenges to the bloc’s businesses and economy. With key trade disputes unresolved and Beijing increasingly aggressive in its actions, the EU must navigate a delicate balance between preserving business ties and maintaining a tough stance.
The crisis began when China restricted exports of rare-earth materials, significantly affecting the bloc’s defense and automotive sectors. This was followed by a sharp rebuke from Chinese officials, which criticized the G7 for having a “Cold-War mentality.” The EU has since canceled high-level economic talks with China, citing a lack of progress on key trade disputes.
Next week, European Commission President Ursula von der Leyen will meet with President Xi Jinping in Beijing, marking the 50th anniversary of EU-China diplomatic and economic relations. However, the summit’s second day has been canceled at Beijing’s request, raising concerns about the effectiveness of the meeting.
The private sector is facing mounting pressure from sustained US tariffs, a flood of subsidized Chinese imports into Europe, and growing threats of Chinese retaliation. Companies such as Mercedes-Benz are urging policymakers to find an “equitable solution” that creates a “level playing field in an open market.” However, with Beijing’s antidumping investigations and duties already being imposed on EU products, European businesses are under significant risk.
The stakes are high, with the world’s three major economic engines – the US, EU, and China – potentially finding themselves in economic conflict. If tensions continue to deteriorate, markets may finally wake up to the true cost of the trade war, and European businesses will be caught squarely in the middle.
Source: https://www.atlanticcouncil.org/blogs/econographics/why-european-businesses-are-now-stuck-in-the-middle-of-an-eu-china-storm