As global trade becomes increasingly fragmented, economic relations between China and the European Union are entering a more confrontational phase, marked by a growing reliance on tariffs, investigations and retaliatory measures.
What began as targeted disputes in specific sectors has steadily widened, drawing in agriculture, manufacturing, technology and consumer goods.
In the latest development in the series, China has imposed tariffs of up to 42.7% on dairy products from the European Union.
The move follows the conclusion of an anti-subsidy investigation launched in August 2024.
According to a statement from a Commerce Ministry official, tariffs will range from 21.9% to 42.7%, with companies that cooperated with the probe facing duties of 28.6%, while those that did not cooperate are subject to the top rate.
Products covered by the new tariffs include fresh and processed cheese, as well as certain categories of milk and cream.
Fresh blow after pork and brandy disputes
The dairy tariffs come shortly after China imposed import duties on EU pork and pork by-products for five years, at rates ranging from 4.9% to 19.8%.
While lower than earlier provisional measures, the duties nevertheless reinforced concerns in Brussels that Beijing is steadily expanding its use of trade defence tools against European exports.
In September, China imposed temporary anti-dumping tariffs of up to 62.4% on EU pork in the form of cash deposits.
Separately, the EU challenged China’s provisional tariffs on European brandy at the World Trade Organisation in November, arguing that the measures were inconsistent with WTO rules.
Taken together, the actions reflect a pattern of tit-for-tat trade restrictions that has gathered pace since the EU imposed tariffs of up to 45% on Chinese-made electric vehicles in October last year.
Electric vehicles at the heart of the standoff
The EV dispute has become the central fault line in EU-China economic relations.
Brussels has argued that heavy state subsidies have allowed Chinese manufacturers to flood global markets with underpriced vehicles, threatening Europe’s auto industry.
EU officials have pointed to China’s spare production capacity of around three million electric vehicles a year, roughly twice the size of the EU market.
With Chinese EVs facing 100% tariffs in the United States and Canada, Europe has emerged as the most obvious outlet, sharpening political sensitivities in Brussels.
China, for its part, has rejected accusations of unfair competition and framed the EU’s tariffs as protectionist.
In response, Beijing has moved to target politically sensitive European exports, including agricultural goods and spirits.
“Even a slight adjustment in China’s import preferences can ripple through farming regions and rural constituencies that carry significant political weight,” Mingzhi Jimmy Xu, an associate professor at Peking University, told Rest of World.
He added that Beijing could create powerful incentives for policymakers to reassess tariff escalation without issuing explicit threats.
A relationship at an inflection point
China is the EU’s third-largest trading partner for goods and services, after the United States and the United Kingdom, and its second-largest partner for goods alone.
Bilateral trade in goods reached €732 billion in 2024, highlighting the scale of economic interdependence even as tensions rise.
European Commission President Ursula von der Leyen described EU-China relations as having reached an “inflection point” during a one-day summit with Chinese President Xi Jinping in Beijing in July.
She warned that while cooperation had deepened over the years, so too had imbalances, pointing to the EU’s large and persistent trade deficit with China.
Last year, the EU recorded a €305.8 billion trade deficit with China, more than double the level of nine years earlier.
Von der Leyen also cautioned that China’s relationship with Russia was becoming a determining factor in its ties with Europe, particularly in the context of the war in Ukraine.
Xi, meanwhile, called for mutual trust and warned against decoupling.
“Boosting competitiveness does not come from building walls or barriers,” he said, according to state media, adding that severing supply chains would result in self-isolation.
Diplomacy amid distrust
Despite the sharp rhetoric and growing trade friction, European leaders have stepped up high-profile engagement with Beijing in recent months.
Visits by the King of Spain, Germany’s vice chancellor and French President Emmanuel Macron have been framed as efforts to stabilise ties amid US unpredictability, economic headwinds in Europe and the stalemate in Ukraine.
These diplomatic overtures are also seen as laying the groundwork for inviting China to attend the upcoming G7 summit in France and signalling support for Beijing’s hosting of the 2026 Asia-Pacific Economic Cooperation summit.
Yet behind the scenes, distrust continues to build.
European officials remain frustrated by what they see as China’s reluctance to address structural issues, including market access barriers, state subsidies and limited imports from Europe.
Beyond tariffs: rare earths and medical devices
The dispute extends well beyond agriculture and vehicles.
After the EU restricted Chinese medical equipment from public procurement in June, Beijing responded by limiting government purchases of EU medical devices.
China has also tightened export controls on rare earths and critical minerals, sectors in which it holds a dominant global position.
Von der Leyen has accused Beijing of using its “quasi-monopoly” as a strategic weapon to undermine competitors in key industries, a charge China denies.
These measures have added to European concerns that China is increasingly willing to weaponise its economic leverage in response to regulatory or trade actions by Brussels.
E-commerce fuels political backlash
Trade tensions are also being amplified by a surge in Chinese e-commerce platforms across Europe.
Companies such as Shein and Temu have rapidly gained market share in countries including France, Germany and Spain, attracting younger and lower-income consumers with ultra-low prices.
In the first half of 2025, Shein’s average monthly unique visitors in the EU reached 146 million, up 11.6% year on year, with more than 27 million users in France alone.
Temu followed with 116 million monthly active users.
European retailers and industry groups argue that these platforms exploit regulatory loopholes to flood the market with cheap goods that often fail to meet EU standards.
In October, members of the European Parliament questioned whether such companies were benefiting from a “regulatory vacuum”.
Under pressure, the European Commission decided to bring forward the removal of customs duty exemptions for small parcels to 2026, from a previously planned mid-2028 timeline, and is considering additional handling fees.
Similar debates are playing out in the UK, where domestic retailers have warned of eroding market share.
Industry caught in the middle
European industry finds itself squeezed between what it sees as an ultra-competitive China and a protectionist United States.
Macron has argued that Beijing should respond by increasing investment in Europe, echoing the wave of European investment that flowed into China decades ago.
“I am trying to explain to the Chinese that their trade surplus is untenable and that they are killing their own customers,” Macron said earlier this month, warning that Europe could ultimately follow the US in imposing broader customs duties.
At the same time, he proposed a truce involving the mutual dismantling of aggressive policies, including European restrictions on semiconductor exports and Chinese limits on rare earths.
Chinese investment in Europe is already expanding in sectors such as electric vehicles and batteries.
BYD’s European sales tripled in 2025, and the company is building its first European factory in Hungary, with plans for another in Spain or Türkiye.
Battery maker CATL has launched a joint venture with Stellantis in Spain, while Envision AESC is supplying batteries to Renault-Nissan in France.
Calls for a stronger European response
Some analysts argue that Europe’s response to China’s industrial policy has been insufficient.
Brad W. Setser of the Council on Foreign Relations has said Europe is being hit by China’s industrial successes and a weak yuan, and needs to take macroeconomic imbalances more seriously.
Others, including Pascal Lamy of the Jacques Delors Institutes, have urged both sides to recommit to multilateral rules and institutions such as the WTO, rather than sliding into escalating protectionism.
For now, China’s dairy tariffs signal that the trade conflict is far from contained.
As disputes multiply across sectors, the challenge for both Beijing and Brussels will be to prevent economic rivalry from hardening into a broader rupture with lasting consequences for global trade.
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