Europe vs. the US-China Trade War: Is It Losing Ground in International Trade?

Europe vs. the US-China Trade War: Is It Losing Ground in International Trade?

In 2025, the trade war between the United States and China has escalated to levels unseen since the Great Recession. Both countries have imposed massive tariffs on strategic products, affecting not only their own economies but also global actors. Europe, as the largest economic and trade bloc in the world, finds itself in a delicate yet strategic position: dependent on both giants, with high exposure in key industrial and technological sectors.

This article explores how the trade war impacts the EU, what measures have been adopted, the legal risks companies face, emerging opportunities, and the strategies needed for Europe to stop reacting passively and become an influential player in international trade.

Economic and Legal Impact in Europe

1. Rising Costs and Pressure on Companies

US tariffs and Chinese retaliations have generated additional costs exceeding €50 billion for European companies. Sectors such as automotive, aerospace, heavy machinery, electronics, and consumer goods are directly affected.

For example, European car manufacturers face high costs for components imported from China and additional tariffs when exporting to the US. Airbus is also pressured by US tariffs on aircraft and parts, while European consumers may see price increases of 8–12% on certain products.

The economic impact is not linear: small and medium-sized enterprises dependent on international supply chains are particularly vulnerable and must restructure contracts, seek alternative suppliers, or absorb losses, directly affecting the EU’s competitiveness.

2. Trade Dependence and Geopolitical Exposure

Europe maintains significant dependence on the US and China. In 2025, European exports exceed €2.1 trillion, while imports are around €2.05 trillion. China is the main supplier of advanced machinery and high-end electronics, while the US remains the destination for European aerospace, pharmaceuticals, and agricultural products.

This dependence exposes Europe to external political and economic decisions: unilateral changes in US or Chinese tariff policies can directly impact supply chains and EU GDP, generating legal tensions in international contracts and necessitating commercial arbitration.

3. Legal Risks and Regulatory Compliance

The legal component is central to Europe’s strategy. The EU has filed disputes with the World Trade Organization (WTO), claiming that certain US measures and Chinese practices violate fundamental international trade rules and intellectual property agreements.

European companies must adapt to this environment by:

- Including international arbitration clauses in contracts.

- Strictly complying with trade and customs regulations.

- Implementing legal strategies to protect patents and intellectual property, particularly against forced technology transfer practices by China.

Current EU Responses

1. Retaliatory Tariffs

In 2025, the EU implemented €72 billion in tariffs on US products, including aircraft, cars, steel, and alcoholic beverages. This action aims to balance competition and protect strategic industries against unilateral external measures.

2. Negotiations and Bilateral Agreements

Despite tensions, the EU maintains active dialogue with the US. In July 2025, a partial agreement was reached, establishing base tariffs of 15% on European products in exchange for investment commitments in strategic US sectors. Such negotiations reduce uncertainty but leave the possibility of political changes affecting conditions.

3. Diversification of Trade Partners

The EU seeks agreements with Mercosur, Canada, India, and Southeast Asian countries to reduce dependence on China and the US. This strategy is crucial to ensure market stability, expand exports, and protect vulnerable sectors such as automotive, pharmaceuticals, and high-tech industries.

4. Strengthening Strategic Autonomy

Europe is investing in key sectors such as energy, defense, and technology, including the development of European 5G networks, electric vehicle batteries, and renewable energy projects. This aims to reduce vulnerability to external decisions and ensure internal production and supply capacity.

Challenges and Opportunities for Europe

- Challenges

- Internal fragmentation: Political and economic differences among member states limit unified response capacity.

- Unfair competition: Chinese state subsidies and forced technology transfer practices create an uneven playing field.

- Exposure to external actors: US and China decisions can disrupt key markets, affecting GDP and industrial stability.

- Opportunities

- Global trade redistribution: Europe can occupy market niches left by the US and China.

- Regulatory leadership: The EU can set global standards in privacy, sustainability, technology regulation, and labor rights.

- Innovation and competitiveness: Investment in R&D allows Europe to lead emerging sectors and reduce technological dependence, increasing global influence.

What Europe Should Do

To avoid trailing behind the US and China, Europe needs to move toward a more cohesive federal union:

- Common trade policy: Unified strategies to negotiate from a position of strength.

- Economic and fiscal integration: Coordinated policies to protect block stability and coherence.

- Protection of strategic industries: Energy, technology, automotive, pharmaceuticals, and defense.

- Institutional strengthening: Greater decision-making power and implementation capacity for European policies.

- Investment in innovation: R&D in strategic sectors to reduce dependency and lead in global technology.

If Europe does not advance in these areas, it will continue reacting to external decisions and losing strategic and economic influence relative to the superpowers.

Conclusion

The 2025 trade war demonstrates that Europe must act with strategic vision and unity. The measures adopted are important steps, but insufficient. Only through greater political, economic, and legal integration can Europe protect its interests, lead in international trade, and avoid remaining in the shadow of the US and China.

A federal, cohesive Europe capable of acting united will be more competitive, ensure stable markets, and consolidate its role as a global player in the economy and international law.