The world is watching Washington and Beijing trade blows again.
You know the kind I’m talking about - tariffs, export controls, and threats. All the familiar noise.
Because of this, the next day, President Trump threatened a 100% tariff on all Chinese goods.
But while everyone braces for another round of U.S.–China dog fighting - a different front is forming - one that’s been building under the radar.
I’m talking about China vs. the European Union (E.U.).
It’s a trade war most aren’t watching yet - but it looks like it’s coming. And it could be bigger than many realize.
How Europe Became Collateral Damage in the U.S.–China Trade War
To understand how Europe got dragged into this, you have to see it for what it is - collateral damage from the U.S.–China trade war.
Long story short, the U.S. wants to fix its trade balance with China - which has been deeply in deficit for more than two decades. Washington blames Beijing for unfair trade practices like currency manipulation (keeping the yuan weak to make exports cheaper), heavy subsidies, and dumping goods that have gutted U.S. manufacturing and capped American exports.
Meanwhile, China is facing its own problems. The country is dealing with a 2008-style housing bust, collapsing consumption, and a deflationary spiral. To fight that, Beijing has decided to double down on what it does best - manufacturing. Their goal is to “export its way out” of a slowdown.
In truth, both sides want to export more and import less. But the math can’t work that way (for someone to run to sell, the other side must buy).
Thus, neither side wants to give an inch - because doing so would negatively affect their economies.
There’s no easy win here. But the trade war results are already showing.
For instance. U.S. imports from China have fallen roughly 30% year over year in September - marking the sixth straight month of double-digit declines after a 33% drop in August.
Figure 1: Statista, September 2025
Europe Becomes China’s New Export Dumping Ground
So, where does Europe fit into all this?
Because as I mentioned above, China isn’t going to sit back and watch its economy slow.
So, the goods it’s losing in the U.S. are now heading to Europe - flooding E.U. markets and forcing Brussels to absorb the imbalance (basically creating the same dynamic that irritated the U.S.).
To put this into context, Chinese exports to the E.U. rose more than 14% - the largest jump in over three years - while shipments to the ten-nation Southeast Asian trading bloc (aka ASEAN) climbed nearly 16%2.
In short, China’s exports haven’t slowed down (they’ve actually risen). It’s just that they’ve been rerouted to Europe and other nations.
Figure 2: Statista, September 2025
Why the E.U. Is Losing Patience with China’s Trade Practices
The frustration in Brussels isn’t just about cheap electric cars competing with their own global auto output.
It’s about something bigger - a flood of Chinese goods revamping Europe’s industrial core.
For years, Europe saw China as a growth engine. German automakers, French luxury brands, and machinery exporters all leaned on Chinese demand to fuel profits.
But that equation has flipped.
Now, China is exporting abroad its economic slowdown. Factories built to feed an endless domestic boom are now producing far more than China can consume - and those excess goods are being dumped abroad.
And this flood of Chinese exports has upset the E.U. economy – for instance:
Europe now sees the same pattern the U.S. did - state-sponsored capitalism dressed as free trade.
That’s why the European Commission has launched waves of investigations - from anti-subsidy probes on Chinese EVs to new carbon border taxes aimed at leveling the playing field.
Still, for all the frustration, Europe’s hands are tied. It depends on China for more than it wants to admit - batteries, rare earths, pharmaceuticals, and components critical to its green transition.
And that’s the paradox - Europe needs China’s supply chain to build the very industries China is taking over.
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The E.U. vs. China: A Trade War in the Making (and Why It Matters) |
Clearly, the E.U. doesn’t want to keep absorbing all these Chinese imports – specifically electric vehicles (since Germany is a massive auto producer, it doesn’t want competition).
But that’s not the only problem.
China is buying less from Europe - hurting European firms that once depended on Chinese demand.
Because of this, the E.U.’s trade deficit with China has ballooned past €300 billion and - at the current pace - is on track to hit a record high in 2025.
Figure 3: Bloomberg, July 2025
She further told the European parliament that, “If our partnership [with China] is to move forward, we need a genuine rebalancing: fewer market distortions, less overcapacity exported from China, and fair, reciprocal access for European businesses in China.”
Meanwhile, E.U. and Chinese leaders met in Beijing shortly after she said this to try and cool tensions. But with how wide apart they are on trade, the summit produced little.
If this all sounds familiar, it should. Because the U.S. did and said the same things before its trade war erupted.
Well, it’s been months later, and China still hasn’t given Europe a single inch. If anything, they took another foot (as I detailed above with the exports to E.U. hitting a 6-year high).
Figure 3: Bloomberg, July 2025
She further told the European parliament that, “If our partnership [with China] is to move forward, we need a genuine rebalancing: fewer market distortions, less overcapacity exported from China, and fair, reciprocal access for European businesses in China.”
Meanwhile, E.U. and Chinese leaders met in Beijing shortly after she said this to try and cool tensions. But with how wide apart they are on trade, the summit produced little.
If this all sounds familiar, it should. Because the U.S. did and said the same things before its trade war erupted.
Well, it’s been months later, and China still hasn’t given Europe a single inch. If anything, they took another foot (as I detailed above with the exports to E.U. hitting a 6-year high).
China’s Response to Europe’s Tariffs and Investigations
Now of course, just like any trade war – it’s not one sided.
Just as the E.U. is now mounting a defense against China – China isn’t sitting still.
China’s message is the same one it’s sending Washington - if you throw a punch, expect one back.
But so far, Beijing’s hits have been light – more like jabs than haymakers.
It knows it can’t afford a two-front trade war with its two biggest customers, the U.S. and the E.U.
Put simply, it can’t export its way out of a slowdown if both markets shut it out.
This isn’t a smaller economy like Turkey or Brazil that can ramp up exports and the world barely notices - because there’s room for that to be absorbed.
But when China does it, it’s too big for the system to handle. It floods global markets without truly fixing its own slowdown.
Think of it like this. A sink can handle a glass of water, but not a firehose.
What’s Next: Europe’s Trade Dilemma and Global Impact
I believe the most important thing to watch now is trade flows. They move geopolitics, currencies, and markets long before the headlines do.
For decades, China relied on the U.S. as its main export hub. That relationship is broken.
Now, by flooding Europe with goods, Beijing risks repeating the same mistake — and igniting another trade war.
The problem is, China doesn’t have many options.
Until its domestic economy stabilizes and consumption recovers, it needs global demand to keep factories open.
Without it, Beijing faces layoffs, bankruptcies, deflation, and unrest.
But the E.U. can’t save China without sacrificing itself.
Europe’s leaders won’t hollow out their manufacturing base just to keep Beijing’s afloat.
And that’s the divide.
So who’s better off - the buyer with weak demand (Europe) or the seller with excess supply (China)?
Well, history suggests it’s the surplus economies, not the deficit ones, that suffer most when trade contracts.
That’s why, when trade dries up, it’s the sellers - not the buyers - who feel the real pain. And this is what China is worried about.
But regardless, no one truly wins a trade war. They’re a race to the bottom - retaliation meets retaliation until both sides bleed market share.
So while the media replays the U.S.–China feud, keep an eye on the next front - China vs. Europe.
Because all it takes is one spark - one tariff, one retaliation - to turn this ignored tension into a full-blown confrontation.
But as always, just some food for thought.
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