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Why EU trade tactics won’t work on Beijing

By Salman Rafi Sheikh – New Eastern Outlook – August 4, 2025

The European Union’s attempt to use trade policy as leverage to shift China’s stance on Russia is faltering, as Beijing firmly resists linking economic ties to geopolitical alignments.

EU-China Ties: Geopolitics more than Trade

The July 24 meeting between European Commission President Ursula von der Leyen and Chinese President Xi Jinping in Beijing was widely described by international media as tense. At the close of the summit, von der Leyen reiterated that the European Union’s relationship with China stood at a “clear inflection point”—a diplomatic phrase signaling that long-standing tensions are now entangled with sharper geopolitical stakes.

Central to this strain is not merely the imbalance in trade—though China’s growing trade surplus with the EU has triggered increasing scrutiny—but rather, the political conditions under which future economic cooperation might occur. While the EU recently imposed tariffs of up to 45% on Chinese electric vehicle imports—citing market distortion and unfair subsidies—the conversation between the two leaders revealed that trade alone was not the core issue. Instead, the underlying tension revolved around China’s strategic alignment with Russia.

Behind closed doors, EU officials conveyed a pointed message: Beijing’s continued support for Moscow, particularly in the context of Russia’s military conflict with Ukraine, is an obstacle to improving trade relations. Von der Leyen was unusually blunt when she stated at the summit’s conclusion, “How China continues to interact with Putin’s war will be a determining factor for our relations going forward”. She obviously did not discuss the underlying reasons, i.e., Washington’s and EU states’ bid to expand NATO to include Ukraine and militarily encircle Russia, for Russia’s military conflict with Ukraine.

In response, President Xi Jinping pushed back against this framing. He maintained that “the challenges facing Europe today do not come from China,” and emphasized that there are “no fundamental conflicts of interest or geopolitical contradictions between China and Europe.” His comments signaled Beijing’s desire to compartmentalize its relationship with Moscow, resisting the EU’s efforts to link trade policy with foreign policy alignment.

For Brussels, however, such compartmentalization may no longer be tenable. European foreign policy is increasingly shaped by the transatlantic context. As the United States ramps up pressure on NATO allies—most of whom are in Europe—to boost defense spending and expand military capabilities, the EU finds itself under both strategic and political pressure to limit Russia’s influence. US officials have repeatedly called on European partners to take a more assertive role in confronting shared adversaries, with Russia chief among them.

How can the EU manage the so-called “threat” from Russia? One way is to boost its defence spending. But defence capacity cannot be increased overnight. It is a long-term solution. Simultaneously, therefore, Brussels is increasingly relying on its trade ties with China as a pressure tactic to strengthen its position vis-à-vis Beijing. EU officials hope that if China can somehow be weaned away from Russia, it might help them force Moscow to the negotiating table and end the ongoing conflict in ways that might protect their long-term interests. It is for this very reason that the EU has now begun sanctioning Chinese entities that may have some connection with Russia. This is pretty evident, in the EU’s decision to impose sanctions last week on two Chinese banks for their role in supplying Russia. Obviously, it annoyed Beijing, but it also sent a clear message. However, if the EU hopes that these pressures will force China to “decouple” from Moscow, it might be sorely mistaken.

Beijing won’t submit to pressure

China recently found success vis-à-vis the Trump administration’s so-called “Global War on Trade”. The US was forced to start negotiations with Beijing because the latter was able to demonstrate not only resilience but also its ability to dominate the global supply chain of critical minerals, forcing the Trump administration to roll back some export curbs on China, including a stunning reversal of the ban on sales of a key Nvidia AI chip.

In today’s context, the EU and the US are hardly the strongest of allies. With the EU fighting US tariffs separately, Beijing fully understands that there are no swords hanging over its head to quickly resolve trade or geopolitical issues with the EU in ways that may not protect Beijing’s interests. Still, while the expectation in both Washington and Brussels was that tariffs would hurt the Chinese economy hard enough for it to change its geopolitical position vis-à-vis Russia and Ukraine, the Chinese economy has been performing well. In fact, it has delivered better-than-expected growth months into the trade war, according to government data, posting a record trade surplus that underscores the resilience of its exports as they pivot away from the US market. The EU economy, on the contrary, is facing sluggish growth rates in 2025 and will continue to grow very slowly in 2026. It is for this reason that when China slowed exports of rare earth minerals to Europe, it triggered a temporary shutdown of production lines at European auto parts manufacturers. And this month, China hit back at European Union curbs on government purchases of Chinese medical devices by imposing similar government procurement restrictions on European medical equipment.

The EU, therefore, must tread carefully. If the Trump administration was unable to force China into submission, Brussel’s capacity is no match either. In fact, Brussel’s core interests will be served much better if it were to 1) de-link its China policy from the US policy on China, and 2) de-link European geopolitical tensions from its ties with China. The EU can surely approach and maintain its ties with Beijing on their own merit and independently of any external factors.

Salman Rafi Sheikh is a research analyst of International Relations and Pakistan’s foreign and domestic affairs.

August 4, 2025 - Posted by aletho | Economics, Russophobia | China, European Union, United States