Will a closer EU-China partnership stop the trade war?

Written by Felix Yang || 20 Jul 2018

The 20th China-EU high summit was held in Beijing this past week and attracted a lot of attention due to the current global trade tensions. As the speculation on trade war continues, the EU and China decided to stand together against Trump’s attack on the global trade system.

The EU is China's second largest trading partner. While Trump’s tariffs hit the prospects of the Chinese economy, the EU is becoming a more important market for China as well. However, the EU has complained about China’s tariffs and trade barriers too, the same as Trump, including the steel dumping and cheap imports. In their opinion, China has enjoyed the benefits of fruitful acquisitions and free investments in the EU market, while companies from Europe still find it extremely difficult to enter the Chinese market, not mentioning purchasing Chinese assets. These issues will create difficulties to further increase trades between the EU and China, if China does not make any changes.

The good news is China is expected to keep opening its market to the world. As the Chinese premier Li Keqiang said during the EU-China summit, China has reduced tariffs on auto, medicine, and other consumption goods recently, as well as lifting certain barriers against overseas investment. These changes will benefit the EU’s exports and investment. The two sides are also working on the Comprehensive Agreement on Investment, which may be the most important step for the EU-China trade partnership in the future. The development is expected to create more opportunities for EU investors in the Chinese market.

More importantly, a closer China-EU relationship can stabilize the free trade system, which is under attack from Trump and the US. Most countries would prefer to negotiate and find a less damaging way to solve conflicts on trade issues. However, if Trump started a global trade war, no country will benefit. The growth prospects for every country around the world, including the US will be damaged. As the world’s biggest traders, the EU and China have agreed to develop a strategic trade partnership. Facing the same “enemy”, the two sides can keep the global market calm by making a strong alliance, at least for now.

The leaders from the EU also built a unified front with Japan during their Asia trip after the summit. However, the reality is the initiative seems still lying in the hands of Trump. As the biggest economy in the world, the US still has the power to spark the war. The future remains uncertain as Trump is determined to negotiate with tough methods. We may have to be prepared for the worst situation. No matter what, a closer EU-China partnership could at least create more buffers for each other.

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