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Radio France Internationale
Radio France Internationale
World
Jan van der Made

Trade relations hang in the balance as China’s top diplomat tours Europe

European Union foreign policy chief Kaja Kallas greets Chinese Foreign Minister Wang Yi prior to a meeting in Brussels on 2 July. AP - Virginia Mayo

China’s top diplomat Wang Yi’s high-profile tour of Europe this week has been dominated by deepening trade tensions and mounting security concerns, with relations between Beijing and the European Union their most strained in years. Meanwhile, Brussels is attempting to maintain good relations with Washington, in the face of President Donald Trump's unpredictable policies.

While Wang is touring Europe and meeting with top decision makers, China's commerce ministry moved to massively increase some tariffs on EU products.

The Chinese ministry, which announced the measure on Friday, said its investigations had found that EU brandy was being dumped on the Chinese market, threatening domestic producers. The country's anti-dumping duties of up to 34.9 percent on European brandy imports will take effect on 5 July.

To circumvent these newly imposed tariffs, a number of predominantly French producers – including leading Cognac houses Pernod Ricard, Rémy Cointreau and Hennessy – have consented to sell their products in China at prices no lower than a predetermined minimum.

Starting from 5 July, these firms will be permitted to operate under this pricing scheme as an alternative to paying the duties.

French cognac hit hard by Chinese anti-dumping measures

China's measure follows the EU’s imposition of up to 35 percent tariffs on Chinese electric vehicles (EVs) last October, citing unfair subsidies. Beijing has denied the allegations and responded with probes into European pork, dairy, and now brandy.

The dispute has reached the World Trade Organization, which is reviewing the EU’s actions. The timing is particularly sensitive, as China and the EU are set to mark 50 years of diplomatic ties at a summit later this month, although reports suggest Beijing may cancel part of the event amid the tensions.

'Not very transparent'

In Berlin, German Foreign Minister Johann Wadephul criticised China’s "unilateral and often not very transparent" export restrictions on rare earths, which are vital for industries including electric vehicles and electronics.

Since April, China has required export licences for these strategic materials, causing global concern as it controls nearly two-thirds of mining and 92 percent of refining. German businesses have voiced alarm over the uncertainty, which Wadephul warned is damaging China’s reputation as a reliable partner.

German Foreign Minister Johann Wadephul attends a press conference in Egypt on 13 June. AP - Khaled Elfiqi

Wang defended the controls, calling rare earths "dual-use goods" with both civilian and military applications, and insisted that export management is a matter of sovereignty. He proposed a "green channel" to ease exports to the EU, but the issue remains a sticking point as Europe seeks to reduce its dependency on Chinese supply chains.

How the EU’s reliance on China has exposed carmakers to trade shocks

European security

Security issues have also come to the fore during Wang’s meetings with EU officials. In Brussels, EU foreign affairs chief Kaja Kallas accused China of undermining European security by supporting Russia’s war effort in Ukraine, conducting cyberattacks, interfering in democratic processes and engaging in unfair trade practices.

"Chinese companies are Moscow’s lifeline to sustain its war against Ukraine," Kallas said, adding that these actions "harm European security and jobs".

Wang rejected the accusations, insisting that China is not supplying lethal weapons to Russia and portraying Beijing as a neutral party seeking peace.

He warned against "confrontation" and urged the EU to pursue a more pragmatic relationship, adding that "China is not the United States" and should not be treated as such.

Despite EU sanctions on Chinese firms accused of aiding Moscow, foreign policy leaders and diplomats from the bloc. including Kallas, admit these measures have failed to shift Beijing’s strategic partnership with Russia.

China's FM in Europe to seek closer ties in 'volatile' world

EU-US trade deal

The backdrop to Wang’s visit is a rapidly shifting global trade landscape, with the EU also facing the threat of higher US tariffs. President Trump’s 9 July deadline for new tariffs is looming, and failure to reach a deal could see levies on EU imports double to 20 percent or more.

Germany, Europe’s industrial powerhouse, is particularly vulnerable, as the US is a key market for its exports.

Recent data showed German industrial orders fell by 1.4 percent in May, a sharper drop than expected, raising concerns about the country’s fragile recovery after two years of recession.

Economists warn that the "sword of Damocles" of US tariff policy hangs over the entire European economy. Peter Leibinger, president of the Federation of German Industries warned that escalating US tariff policies could plunge Germany into its third consecutive year of recession, and have called for substantial reforms to restore competitiveness.

Donald Trump delivers remarks on reciprocal tariffs during an event at the White House entitled 'Make America Wealthy Again' on 2 April. AFP - BRENDAN SMIALOWSKI

Meanwhile, French President Emmanuel Macron has called for an EU-US trade deal "as soon as possible, with the lowest tariffs possible," arguing for open markets rather than protectionism.

EU trade chief Maros Sefcovic is in Washington for last-ditch talks, with European Commission President Ursula von der Leyen declaring the bloc “ready for a deal".

However, as Wang's European tour concludes, the prospects for easing friction appears dim. Trade and security disputes with China are deepening, and the EU’s economic outlook is clouded by both transatlantic and Asian tensions.

With a critical EU-China summit and a US tariff deadline both approaching, Europe finds itself attempting to defend its economic and security interests, squeezed between two superpowers.

(with newswires)

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