The EU’s China Conundrum
Unity or Division Against China?
By | Álvaro Rodríguez Fernandez,
MARCH 17, 2025
Spring 2025
Undoubtedly, no order is eternal, and post-Second World War international conventions find themselves at a critical juncture. Rising tensions over the last decade have shaped perceptions, policies, rhetoric, and the economics of today. The era of offshoring industries and supply chains while creating complex interdependent ties might be coming to an end. And although the transformation of the international economic architecture is a slow-paced process, sheer human determination to break it might be a powerful incentive. Additionally, defense alliances are also adapting to a new global arena and the systemic challenges that arise. How the upcoming world order will look remains unknown. However, global actors are steadily positioning themselves for what’s to come. And among transatlantic relations, an uncomfortable question awaits to be answered.
For a long time, the nature of relations with China has been at the core of one of the most divisive issues within transatlantic relations. Its complexity underscores strategic foreign and security policies, power projection, and domestic economic concerns. But it runs deeper than that. Although it may seem like a minor issue, the truth is that it addresses a very interesting point. Chinese economic growth and increasing global influence pose a systemic challenge to that of the U.S. However, its ascendance is not perceived equally on both sides of the Atlantic.
Since the early 2010s, U.S. foreign policy had begun to shift its attention from the Middle East toward the East, the so-called “Pivot to Asia.” This had two main effects on its EU counterparts: the need for a security update from an outdated worldview and a discreet balance of interests in their approach to China. Being able to support two war fronts was the paramount objective of the post-1945 U.S.—a powerful testimony to its industrial, technological, and military prowess. On the other hand, it was enough for Europeans in general and consecutive EU member states specifically to deal with a readjustment of the continent’s economic and power structure. As such, the Marshall Plan’s incentives were also coupled with the deployment of hundreds of thousands of personnel and assets. Then, of course, Washington did not view China as it does today.
The security guarantees that the EU, and specifically NATO members, have enjoyed over the last couple of decades came at the expense of a disproportionate commitment to spending, industrial capacities, and technological and manpower capabilities. Most European capitals neglected their armies under the belief that, no matter what, their backs were strongly covered by Washington. Nevertheless, by 2014, the bells at the Wales Summit started to ring. By then, it was pretty much clear that the U.S. would not be as present on European soil as most partners were accustomed to. Today, that is a reality. The shift to the Indo-Pacific shows not only a reassessment of strategic, diplomatic, and foreign policy priorities but also a whole new mindset regarding the industrial and logistical capabilities of the U.S. defense sector.
While some commentators argue that the new Trump administration seeks to ultimately rearrange systemic competition into a map of spheres of influence, it is still too early to draw categorical conclusions. Yet, the latest declarations by the White House de facto pose a serious question regarding its commitment to allies worldwide. However, this has nothing to do with its own protection, hence the shipbuilding plans and investments allocated to renovations in Pacific bases. This comes as a response to growing Chinese power projection in its neighborhood, mostly due to the increasing aggressiveness displayed in the last few years in the South China Sea and the Indian Ocean, as well as the ever-confrontational dispute over Taiwan.
Up until now, defense and national security have dominated the conversation. Are relations with China so limited? Certainly not. Switching to the economic portfolio gives a much more nuanced perspective. Until 2017, the dynamic, driven by the huge opportunities created with China’s entrance into the WTO in 2001, had benefited both parties massively. This metric applies to the EU as well. The resulting deindustrialization and a growing trade imbalance created black holes in the U.S. economy and soon started to raise the alarm. Thus, national security concerns regarding the CCP’s control over Chinese multinationals and their investments and expansion—both inside and in third markets (see Latin America or Africa)—as well as espionage and several other issues (currency and debt manipulation, subsidization…) aligned, creating a two-faced challenge.
On one side, the U.S. is dealing with a major threat to its security, international status, and image. On the other, it is trying to engineer a sustainable economic model capable of balancing domestic needs, the role of the dollar, and U.S. interests abroad. To sum up, it is fairly accurate to portray the competition between the two actors as a systemic challenge over the prevalence not only of one global power but of their respective worldviews. Where does the EU stand here? In order to unlock the nature of the drift between the EU and the U.S., it is essential to understand the basis of their relationship and where they diverge. While the latter is genuinely concerned with security aspects (both conventional and non-conventional), the former seems to be less worried.
Only the links between Beijing and Moscow in the ongoing war in Ukraine seem to have triggered some alarm in European capitals and Brussels in the form of sanctions and broader condemnation. This stems from Europe’s lesser involvement, highlighted mostly in the form of cybersecurity (which is, again, heavily tied to the economy and intellectual property as well). For the European perspective, China’s danger is, above all, an economic affair. Like their transatlantic peers, the EU benefited from China’s entrance into the WTO, and up until the 2010s, things went smoothly. Consequently, concerns over state-owned enterprises, unfair subsidies, and unlawful tactics—both in the production process and the export regime—made Brussels react.
Such tensions reached a turning point a few years after the first batch of tariffs was imposed by the U.S. Since 2019, trade and investment screening mechanisms and tariffs have increased the pressure on Chinese companies and products. Moreover, the COVID-19 experience made many officials realize the depth of their dependency, from finished tech products to basic medical gear to raw materials. As a response, a number of instruments have been introduced and enforced since, stressing the importance of economic security, compliance with competition laws and EU production standards, and a broader de-risking approach to Chinese imports and the EU’s supply chains under the framework of strategic autonomy.
Summed up, it is fairly accurate to portray the competition between the two actors as a systemic challenge over the prevalence, not only of one global power, but of their respective worldviews.
Overall, there are two main takeaways from both perspectives. The offshoring and free trade era for ‘Western’ multinationals in China is gone. De-risking—or outright decoupling—policies are in vogue on both sides of the Atlantic, meaning higher tariffs and state protection of domestic industries or markets. And while this won’t erase the deep commercial ties between the three actors, it will surely take a toll on the configuration of global supply chains and markets, prices, and ultimately on consumers. But this is not only a unilateral trend, as China has sought more self-sufficiency—mainly in technological affairs and high-end exports—taking advantage of the groundwork done through the Belt and Road Initiative. And it is exactly here that the division grows.
While the U.S. has easier access to cheap energy, capital, and raw materials, the EU struggles with energy prices, venture capital and equity raising, and highly dependent supply chains. Moreover, the EU has suffered an important process of deindustrialization, resulting in a net loss of market share in different regions, often in favor of China. And not only would it struggle more than the U.S. to reindustrialize given the context, but it would also need to carefully navigate a possible shift in Chinese exports due to the increasing tariffs in the U.S. since January 2025. If the tariff wars keep up between Beijing and Washington, the former will have to make a decision: either accept the hit, seek a fast replacement elsewhere, or digest it at home.
Amid a growth slowdown, neither the first nor the third option seems easy to implement. Additionally, rising tariffs might be applied to European imports as well. Even in the worst days of neo-protectionism and geopolitical disagreements of the late 2010s and early 2020s, tensions were not enough to have a structural impact. By contrast, since January, a new paradigm seems to have rapidly settled. Fueled by Trump’s strong control of both houses, his return to the White House leaves a sour taste of revenge for many inside and outside the country. And a hectic first month seems to confirm the new wind for the upcoming years, dominated above all by one of the most difficult emotions to deal with from a foreign policy or economic perspective: utter instability. Therefore, it might be too late to try to pursue an in-depth revamping of the trade relationship across the Atlantic. Plus, fair criticism can be directed at EU officials (as well as many member states). Shock and unpreparedness describe the mood of many, given the lack of a coordinated or pre-planned response to what the Union could face.
This can further disrupt the balance of many export-oriented sectors, as they would be obliged to find a replacement that most likely won’t appear at home. Under a somewhat similar scenario, fierce competition between European and Chinese firms would occur, leaving the former in a tug-of-war situation. If a more protectionist playbook is followed, retaliation in the form of import restrictions or operational restrictions in the Chinese market could backfire, damaging the electronics, green tech, and automotive sectors, along with causing shortages of rare earths and raw materials. European targets in the field of climate action and the green transition, digitalization, and AI, or the pressing issue of defense rearmament, would be impossible to attain—not to mention growth projections for traditional core industries like the automotive, steel, or EU green tech manufacturers. Likewise, the same could happen in the case of Chinese protection aimed at boosting domestic consumption or autonomy.
And even if the EU did not like to see its domestic markets flooded with cheaper goods while being ousted from exporting markets, a second rift is taking place in-house. What could seem at first to be a two-bloc dichotomy portrays a much more complex reality. While the Commission and countries like the Baltics or Poland favor an alignment with the U.S. and more assertive policies, others such as Germany, Greece, or Spain favor a rather open position. A third position is taken by France or Italy, telling a more complete, although nuanced, story. Concerned about strategic autonomy goals, they have significant commercial interests in the Asiatic giant.
Consequently, they reflect the delicate balance between the U.S. and China, where the EU stands. This inner split is not only proof of the complexities of EU policymaking; it also tells a story of geopolitical alignment—Baltic states being more exposed to Sino-Russian threats, thus more dependent on NATO’s security guarantees—and economic interests—luxury (and conventional) exports to Chinese markets and recent multi-million-dollar investments in declining industrial sectors. To make it worse, both sides have powerful arguments. Although the new U.S. administration is openly fierce regarding the trade imbalance, that same stance could be seen as a comparative advantage by certain industries in need of market share.
Consequently, they reflect the delicate balance between the U.S. and China where the EU stands.
Conversely, a fruitful bond with China could further strain the transatlantic relationship, potentially leading to retaliation against the EU externally and internally—assuming that China would demand less strict terms on investment and trade defense regulations. On the inside, the political battle is also being played at the national level, an element of crucial importance for a Union that often works through cooperative mechanisms. Industrial defense instruments under the economic security framework have been developed little by little since the pandemic but now operate within the paradox of an autonomy-seeking yet vulnerable Union.
Foreign policy or domestic economy? Global power projection or global equilibrium cooperation? Maximal securitization of trade or the pursuit of shared interests? Whatever the future may be, the next few years are going to prove decisive for the future of ‘Western’-Chinese relations and, therefore, the rest of the world. The equilibrium in areas spanning from international finance to climate action and global security commitments is absolutely fundamental for a safer, more prosperous, and sustainable planet. A potential drift among transatlantic allies could prove disastrous for both, while any potential direct confrontation among giants could accelerate systemic changes and alter the current order as we know it.