Protectionist measures could harm EU's interests

Brussels' most effective response to its trade deficit with China should be to collaborate with Beijing to boost exports of goods and services, rather than 'building walls' or 'setting limits'

The European Union recently intensified its implementation of protectionist measures targeting Chinese trade and investment. These actions, including the Foreign Subsidies Regulation, the proposed Industrial Accelerator Act, the NIS 2 Directive and amendments to the Foreign Direct Investment Screening Regulation, echo past United States' accusations that cite China's "overcapacity" and "undervalued renminbi" as grounds for imposing high tariffs and restrictions on Chinese goods.

Since 2019, when the EU officially described China as "a partner for cooperation, an economic competitor and a systemic rival", China-EU relations have increasingly been influenced by geopolitical and ideological biases, undermining mutual trust. Economic and trade frictions have been politicized. The previously cooperative and mutually beneficial economic relationship has been misconstrued as a zero-sum game, leading to growing tensions despite shared goals in global governance and multilateralism.

EU policymakers and think tanks have been significantly influenced by US geopolitical and economic strategies regarding China. During his first term, US President Donald Trump adopted aggressive political posturing, imposing high tariffs against China, alongside strict export controls, while aiming for technological decoupling. This escalated China-US geopolitical and economic competition, directly impacting the EU's 2019 shift in its China policy to the "triple positioning" of a cooperation partner, an economic competitor and a systemic rival.

Although the concept of "de-risking" was proposed by European Commission President Ursula von der Leyen in 2023, its core ideas stem from US initiatives such as supply chain restructuring and "re-coupling", "friend-shoring" and "near-shoring", all aimed at "de-risking" from China. Consequently, "de-risking" has come to represent a coordinated US-EU policy toward China, with the EU aligning itself with the US' sanctions against Chinese tech companies.

Despite strained US-EU relations during Trump's second term, marked by Washington's many unfriendly policies targeting the EU, political parties within the EU establishment continue to maintain their geopolitical biases. They even echo US justifications for imposing economic pressure on China in their quest for advancing unilateral trade protectionism.

There is no inherent geopolitical competition between the EU and China. Historically, both sides viewed bilateral trade and investment as mutually beneficial, forming the foundation for steadily growing trade relations. According to China's Ministry of Commerce, in 2025, bilateral trade reached $828.1 billion, and in the first half of 2026, the number was $447.88 billion, a 14.2 percent year-on-year increase. EU investments in China have exceeded $150 billion, while Chinese direct investment in the EU has reached $125 billion.

The two sides share consensus on global governance issues such as upholding a United Nations-based international order, climate action, aiding developing countries, maintaining international financial stability, supporting multilateral free trade, combating cross-border crime and tax evasion, and enhancing global health security. However, certain ideological factions within the EU seek to politicize economic differences, undermining the fundamental nature of mutual cooperation and dragging China-US competition into China-EU relations, ultimately harming the EU's interests.

In its trade disputes with the US, China has reciprocated with restrained countermeasures. This has led the US to recognize the futility of unilateral protectionism, resulting in mutual agreements to remove high tariffs and irrational export restrictions. Following Trump's visit to China in May, the two sides established trade and investment councils to discuss bilateral trade and investment issues, fostering a constructive strategic relationship.

If the EU goes ahead with its protectionist measures against China, Beijing would inevitably respond with countermeasures. Given China's effective counterstrategies against the US, the EU could face great challenges. In 2025, China-US bilateral trade saw an 18.7 percent decline, but following a compromise agreement, China's imports from the US rebounded to rapid growth, with year-on-year increases of 20.36 percent and 25.85 percent in May and June, respectively. A similar conflict between China and the EU would disrupt the 8.7 percent growth in Chinese imports from the EU in the first half of 2026.

According to General Administration of Customs, the EU's dependence on the Chinese market is greater than that of the US, with EU exports to China reaching $268.17 billion in 2025, nearly doubling the $139.7 billion of US exports to China. A trade war would inflict greater damage on the EU than it did on the US. Therefore, recognizing the underlying reasons for the declining competitiveness of industries such as automotive and machinery, reforming innovation-stifling regulations and bureaucracy, and encouraging collaboration with Chinese enterprises would be in the EU's long-term best interests.

The EU previously viewed bilateral trade imbalances as a non-issue due to its overall trade surplus. However, recent years have seen a shift in perspective. If the growing trade deficit with China is a concern, the EU can engage in technical negotiations with China to address the imbalance. Accusations of "overcapacity", "subsidies" and "undervalued renminbi", previously used by the US, overlook factors such as declining industrial competitiveness and rising energy prices due to geopolitical tensions, which have accelerated industrial relocation. Resorting to unilateral protectionism for short-term gains is counterproductive. High tariffs imposed by the Trump administration failed to revive uncompetitive US industries, and the EU cannot expect protectionism to safeguard its industries and jobs.

China's Ministry of Commerce has provided scientific explanations regarding "overcapacity", "subsidies" and "undervalued renminbi", urging the EU to understand China's position. China does not accept baseless criticisms of its economic model and industrial policies but acknowledges the EU trade concerns. The ministry reiterated China's stance of not pursuing trade surpluses, committing to increased imports, and emphasizing "constructive dialogue to dispel misunderstandings and address concerns". It is the response to the concerns of the EU that China began to increase its imports from the EU in 2026, reversing the negative growth situation. The year-on-year growth rate in the first half of the year reached 8.7 percent. The most effective policy for the EU to deal with the trade deficit with China is to increase the production and export of goods that still have a comparative advantage, and to cooperate with the Chinese government and enterprises to increase the export of goods and services to China, rather than setting restrictions.

The essence of international trade and investment is to enhance corporate profits and national welfare, while unilateral protectionism is a proved policy mistake.

The author is a researcher of international economics at the Shanghai Academy of Social Sciences and the former president of the Shanghai Institute for European Studies. The author contributed this article to China Watch, a think tank powered by China Daily.

The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.