When European leaders met at the European Council meeting in Brussels this month, the specter of a full-scale trade war while China casts a long shadow on the case. In the middle ongoing anti-subsidy investigation in China’s green technology and the looming threat of retaliatory tariffs, the economic foundation of China’s relationship with the European Union appears weak.
However, beneath the hawkish political rhetoric, recent high-level meetings between European officials and their Chinese counterparts underscore a mutual desire to avoid a zero-sum confrontation.
To pull themselves off the brink, Brussels and Beijing must look beyond short-term political posturing. Avoiding a destructive trade war requires action on three key fronts: having strategic patience, acknowledging the new economic reality through major deals, and focusing on investment as an effective balancing tool.
First of all, both sides must exercise strategic patience. The EU’s trade deficit with China, which exceeds €300 billion (US$342.76 billion), has become an easy political metaphor.
However, European policy makers must realize that this balance was not created overnight. It is the culmination of decades of changing global supply chains, the global division of labor, and the steady demand of European consumers. It is a delusion of macroeconomics to believe that such deeply rooted structural dynamics can be reversed in one go, or reversed with a quick series of unilateral tariffs.
More importantly, the geographic context of China’s relationship with the European Union is fundamentally different from that of the United States and China. Brussels and Beijing do not see each other as existential security threats in the traditional military sense.
