Squeezed by US tariffs, China now leans on Europe

Chinese exports to the United States are being disrupted by the tariffs imposed by President Donald Trump. As a result, Beijing is increasingly turning to Europe to find new markets for its goods.

The European Union (EU), meanwhile, is using China's growing dependence to strengthen its own position in trade negotiations with the country.

Analysts say the trade relationship between Europe and China has changed significantly over the past year. Where there was once mutual trade dependence between the two sides, distrust, disputes and competition are now growing, driven by several economic and political factors.

A report in the influential American bimonthly magazine The National Interest said European countries long benefited from trade with China. There was strong demand for European goods among Chinese consumers and businesses, while European buyers were happy to get Chinese products at relatively low prices.

Europe's trade deficit with China remained within manageable limits. Although European countries occasionally objected to Chinese government subsidies for exporters and other trade irregularities, they never took as tough a stance as the United States.

European industrial firms running profitable businesses in China also did not want relations with Beijing to deteriorate. But the situation has changed, mainly for four reasons.

First, under China's 'Made in China 2025' programme, the technological capability and product quality of its manufacturing industry kept rising. As a result, Chinese firms began competing directly with European companies in their own market.

Second, under the same programme, China's production capacity grew far beyond domestic demand. That increased the country's dependence on foreign markets to sell its surplus goods.

Third, the tough US trade policy towards Chinese goods under the administrations of Donald Trump and Joe Biden narrowed China's access to the American market. More of China's surplus goods therefore flowed into the European market, putting pressure on Europe's luxury goods and advanced machinery makers.

Fourth, sales of European carmakers, which once grew rapidly in China, have begun to fall. European carmakers are now facing intense competition in the Chinese market itself.

Between 2003 and 2022, Mercedes sales in China grew by an average of 24 percent a year, BMW by 20.2 percent and Audi by 12.6 percent, but that growth has recently begun to slow.

By the middle of 2026, Mercedes sales in China had fallen 30 percent compared with the same period the previous year. Over the 12 months to the third quarter of this year, BMW sales fell 25 percent.

Imports of Chinese goods into the European market have also risen. In 2025, the EU's imports from China grew by 12.5 percent. With the US market narrowing, Chinese exports are tilting towards Europe, and this new reality is changing the character of trade talks between the two sides.