By Craig Mellow

It seems only logical. The world's two exporting giants, China and the European Union, could team up to resist U.S. President Donald Trump's trade offensive. In practice, that will be tough.

Both sides are poking out olive branches, or twigs. Beijing removed symbolic sanctions against five members of the European Parliament whom it judged overly outspoken about Uyghur minority rights. Eurocrats leaked the possibility of replacing tariffs on Chinese electric vehicles with administratively determined minimum prices.

That's a long way from ditching the China "derisking" policy Europe enshrined a few years ago. The bloc will prioritize patching relations with Washington, only inching toward Beijing as a hedge, Brussels-watchers agree. "Lowering barriers against China is not a good idea for Europe," says Davide Oneglia, director of European and global macro at TS Lombard. "It's much more reasonable to be aligned with the U.S."

Arithmetic is one compelling reason. The EU racked up a record 198 billion euros ($225 billion) goods trade surplus with the U.S. last year. Its deficit with China was EUR305 billion, nearly twice the prepandemic level. "Europe fears that if it strengthens trade ties, it will be flooded by cheap Chinese products," says Carsten Brzeski, global head of macro at ING Research.

Europe watched China obliterate its early lead in green technology like solar panels and wind turbines, using what the Continent considers unfair subsidies, and fears a repeat on electric vehicles. Beijing's critical support for Russia's invasion of EU neighbor Ukraine also rankles.

"Europe is no longer naïve on China," says Eoin Drea, senior researcher at the Wilfried Martens Centre for European Studies. "It's not the El Dorado everybody thought 10 years ago."

A few inches in an $800 billion bilateral trade relationship could still impact economies and companies, however. Prohibitive Chinese tariffs on U.S. imports could spell opportunity for competing European suppliers of advanced industrial or medical equipment, notes Jacob Gunter, lead economics and industry analyst at the Mercator Institute for China Studies.

"Companies like Siemens or ThyssenKrupp may compete with General Electric for Chinese market share," he explains. European jet maker Airbus could take advantage if China continues to boycott U.S. rival Boeing.

More significantly, Trump's trade war could accelerate the integration of the Chinese and European auto industries. While European brands precipitously lose Chinese customers, China's innovative EV and hybrid manufacturers threaten to invade Europe.

Brussels' task is to force them to produce within Europe, preferably through joint ventures that transfer technology to Old World partners. "Europe needs to do a reverse China, trading market access for know-how, " Drea comments.

It's starting to work, driven by the lower-cost European firms who are most vulnerable. Renault and China's Geely Automobile Holdings announced a London-based joint venture last year to make hybrid and high-mileage internal combustion engines. Stellantis, which includes the Chrysler, Fiat, and Peugeot brands, has tied up with Zhejiang Leapmotor Technology. Chinese EV champion BYD expects to start producing at its own plant in Hungary later this year.

"I fully anticipate that the Chinese will replicate the Japanese and Korean nearshoring strategy in Europe," says Germany-based industry analyst Matthias Schmidt.

The Trump administration could still push Europe into a warmer embrace of China. But it would have to try pretty hard. "In the long run the EU and China will be competitors," ING's Brzeski says. "It's a deteriorating economic relationship."

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 01, 2025 16:15 ET (20:15 GMT)

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