The EU and China Are On A Collision Course
Another economic fight threatens to begin
After resuming Japanese seafood imports in June, China has reversed course, once again halting new purchases as the fallout over Taiwan worsens. This is adding to the strain, as 491,000 flight tickets from China to Japan have already been cancelled in the past 72 hours.
Thousands of miles away, however, a separate powder keg threatens to explode that also involves China.
EUROPE SQUEEZES CHINA
Over the past few weeks, Chinese firms have been stumbling in Europe.
Here is a quick recap:
France threatened to ban Shein over childlike sex dolls, and separately, launched a criminal probe into TikTok over the mental health of children.
The Italian government is warning of cheap Chinese imports threatening the nation, putting the spotlight on Shein. Adolfo Urso, the minister for “Made in Italy,” which seeks to protect Italian businesses, said there is an “invasion of low-cost foreign products.”
The EU Commission’s vice-president, Henna Virkkunen, wants to introduce a new law that requires member states to remove “high-risk suppliers” from European telecommunications networks, targeting the likes of Huawei and ZTE.
A new probe has been launched into Chinese robotic lawnmowers sold in the EU over anti-dumping fears. Approximately 40% of China’s robotic lawnmowers are exported to Europe.
SOVEREIGNTY VS. CONTROL
These are not small moves. National governments and the EU leadership are taking aim at different Chinese enterprises based on economic and national security concerns. With the geopolitical environment so fragile, particularly as Chinese purchases of US soybeans stall and the China-Japan situation worsens, little is stopping a fresh fight between Brussels and Beijing.
Should the EU attempt to ban Chinese companies from its networks or should the likes of Shein be paralyzed in certain European markets, the Chinese could fire back.
Unlike just a year ago, when China would have retaliated with investigations or duties, the ground has completely shifted. Now, China might strike back with blanket bans or refuse to supply rare earths to European firms. If this happens, it will be a showdown between technological sovereignty (i.e., EU not wanting foreign firms dominating its networks) and technological control (i.e., China flexing its control over critical minerals).
SHIFTING SENTIMENT
A new fight between the EU and China, resembling the state of play last summer after Europe introduced tariffs on Chinese EV imports, as high as 50% in some cases, will ricochet throughout the global economy. Investors are already scrambling to spread out risks and adapt to changing geopolitics. Now, alongside America First, US-China, China-Japan, the war in Ukraine, and instability in the Middle East, there may also be EU-China.
However, a showdown like this will not be supported by everybody.
China has just replaced America to once again become Germany’s largest trading partner. As economic concerns grow in Hungary, the government might seek additional Chinese capital, building on the mammoth CATL and BYD factories. An EU-China fight could end up dividing the bloc in permanent ways. It also sidelines the strategies of the business community.
Recently, Volkswagen unveiled plans to build its own chips in China for locally produced vehicles. At a moment when the West and China are literally at war over semiconductors, one of the largest Western businesses is seeking new chip manufacturing within the Chinese market. If the EU and China are getting bloody, this may not be possible.
SLIVER OF HOPE
There is, however, a silver lining. No country wants to be overburdened with fights. Even the US paused tariffs on the global economy when the US-China fight erupted in April after Liberation Day. Similarly, observing the flare-ups, the EU and China might both take a tempered approach, already feeling the squeeze from other headaches.
This means, behind the EU-China spat, a test of sorts is occurring. Are the current geopolitical fights too much for governments to manage, stopping further action? Or, have they simply opened the door to a new arena?
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
Mr. Geopolitics is the property of Abishur Prakash/The Geopolitical Business, Inc., and is protected under Canadian Copyright Law. This includes, but is not limited to: ideas, perspectives, expressions, concepts, etc. Any use of the insights, including sharing or interpretation, partly or wholly, requires explicit written permission.