Trade wars are no cure for Europe's ills.

If a company has lagged behind in R&D investment for ten consecutive years, suffered high energy costs, and had internal departments refusing to supply each other, yet blames its losses on the lower-priced supplier at its doorstep and imposes extra taxes on that supplier, what kind of operation is this? Is it a strategy? I think it is more like a financial trick.

The so-called "de-risking" of China by the EU today is actually similar. It just erases the decline of European industrial competitiveness from its own balance sheet and records it in the "state subsidy" account of China.

The problem is that the global industrial chain is not an emotional ledger. Tariffs will not create batteries, software and economies of scale out of thin air, they will only pass the bill on to European consumers, the Global South and climate goals.

Therefore, the EU's economic security policy towards China, named "de-risking", is essentially "selective de-globalization + risk transfer". Its effect of reducing risks is limited. Instead, it arbitrages the risk of internal structural failure in Europe into tough political gains against external parties; it internalizes the benefits of globalization and externalizes the costs of globalization.

The final cost will only be jointly borne by European enterprises, European consumers, global trade rules and the green transition.

The EU has miscalculated the ledger with the deficit as the scoreboard

European public opinion repeatedly emphasizes that the daily trade deficit with China is about 10 billion euros, and Germany's deficit with China in the first eight months of the year has expanded to 76 billion euros, which seems very scary... But the bilateral goods deficit is very easy to be misread.

First, it ignores trade in services. According to Chinese statistics, China's trade in services deficit with the EU reached 48.3 billion US dollars in 2025, and the EU is China's largest source of trade in services deficit.

Second, it ignores ownership. A large part of China-EU trade is realized by European enterprises in China, forming a situation where "the surplus belongs to China and the profit goes to the European side".

Third, it ignores added value. For a German-brand car assembled in China, the export statistics are counted under China's name, but a large amount of profits, design, patents and brand income flow back to Europe.

In essence, a country's trade balance is essentially the difference between savings and investment. The EU as a whole still has a goods surplus of about 128 billion to 133 billion euros with the rest of the world.

This does not look like an economy with a collapsing export sector.

The decline in Germany's exports to China and the rise in its imports from China more reflect Germany's problems in industrial competitiveness, energy costs and demand structure, which cannot be explained by China's "subsidies". Germany's exports to China fell by 12.9% year-on-year in the first eight months of the year, imports from China rose by 10.1%, and the trade deficit with China expanded to 76 billion euros. German industrial and commercial circles point out that the uncertainty of trade policy and insufficient enterprise competitiveness are still restricting exports. Although industry associations have slightly raised the full-year export forecast, the problem of lack of sustained momentum for Germany's export recovery remains prominent.

The German federal government has raised its 2026 economic growth forecast from 0.5% to 1.3%, but the recovery is still not solid.

Energy price pressures brought by the Iran conflict, international trade frictions and domestic structural problems may still constrain subsequent growth.

Treating the bilateral deficit as a scoreboard for winning or losing is caused by the "surplus worship". Trade is not a zero-sum war. Deficit does not mean defeat, and surplus does not mean victory.

The real problems lie within Europe: energy costs, labor costs, bureaucratic procedures, and fragmentation of the single market.

A survey by the European Investment Bank shows that 62% of EU enterprises have difficulties in exporting to other member states. What hinders nearly two-thirds of EU enterprises is the fragmented rules, not Chinese subsidies. Yet Brussels is investigating whether Chinese enterprises are distorting competition.

This is ironic. Eliminating these barriers can allow enterprises to invest more assets, and the investment promotion effect generated by tariffs cannot be compared with it.

Europe has too many, too big and too deep problems of its own. According to the survey of the European Investment Bank, 62% of the surveyed EU enterprises said that they have difficulties in exporting to other EU member states. What hinders nearly two-thirds of EU enterprises from doing business in the single market is the fragmented rules, not China's subsidies.

At the same time, Brussels is investigating whether Chinese enterprises are distorting competition. The European Investment Bank estimates that eliminating these barriers can allow enterprises to invest more assets, and the investment promotion effect generated by tariffs cannot be compared with it.

Brussels relies on defensive tools. The countervailing tariffs imposed on Chinese electric vehicles decided in 2024 are intended to offset the impact of subsidies.

But tariffs will only raise the price of competitors' products, cannot reduce the cost of EU enterprises producing batteries, cannot shorten the cycle for EU enterprises to develop new car models, cannot integrate the fragmented capital market, nor can it give birth to world-class European technology enterprises.

Therefore, the EU has miscalculated the ledger with the deficit as the scoreboard.

If statistical illusions are taken as a judgment of competitiveness, the policy will prescribe the wrong prescription, and when the prescription is wrong, tariffs will come into play.

Tariffs cannot cure Europe's problems, they will only raise its own medical bills

The EU imposes countervailing tariffs on Chinese electric vehicles with the logic of offsetting the impact of subsidies, but tariffs can only raise the price of competitors' products, cannot reduce the cost of EU enterprises producing batteries, cannot shorten the cycle of developing new car models, cannot integrate the fragmented capital market, nor can it give birth to world-class European technology enterprises.

Some data show that after the EU imposed tariffs on Chinese electric vehicles, the sales of Chinese hybrid vehicles in Europe increased sharply, but the EU wants to restrict hybrid vehicles again.

This directly exposes the political and economic paradox in Europe: tariffs do not change the total export capacity, but only change the product structure and production location. Data from Rhodium Group and Mercator Institute for China Studies show that China's direct investment in the EU and the UK increased by 67% in 2025 to reach 16.8 billion euros; greenfield investment reached a record 8.9 billion euros. Tariffs mainly change the production location, and Chinese enterprises shift to local production, local factory construction and local employment in Europe.

As a result, the EU falls into policy contradiction: on the one hand, it wants to restrict Chinese goods, on the other hand, it needs the jobs and industrial chain brought by Chinese greenfield investment; on the one hand, it talks about "de-risking", on the other hand, Chinese enterprises are more deeply embedded in Europe.

If restrictions are imposed in the name of security again, Europe may lose investment, technology and jobs.

This is "reverse embedding": the more you want to decouple, the more entangled you become.

Looking at the example of the United States, the paper by economists Mary Amiti, Stephen Redding and David Weinstein confirms that the tariffs imposed by the United States from 2018 to 2019 were almost entirely passed on to the prices of imported goods. They estimate that by the end of 2018, the actual income loss of the United States was about 1.4 billion US dollars per month.

The ones who pay the bill are American importers and consumers, and the Chinese do not pay for it.

If the EU repeats the same mistake, the bill will also fall on European enterprises, downstream industries and ordinary families.

According to media reports, if the EU completely excludes Chinese enterprises and equipment in 18 fields, EU countries will bear at least 840 billion euros in losses. Who will pay for this money? The pockets of European people, Europe's green transition, and Europe's digital competitiveness.

What is more ironic is that while the EU talks about "de-risking", it is deeply mired in energy risks.

After the Ukraine crisis, energy costs remained high, and the military strikes on Iran by the United States and Israel have further intensified global energy tensions. EU natural gas prices rose by 50%, resulting in an additional expenditure of 3 billion euros.

In this case, launching a trade war against China can hardly be called strategic autonomy, but rather strategic self-harm.

Because protectionism can gain buffer time for a short time, but it cannot create core competitiveness. If it is regarded as a substitute for competitiveness, it is costly self-deception.

The Association of German Chambers of Industry and Commerce warned against launching a trade war, pointing out that labor costs, energy prices and bureaucratic procedures are the self-imposed obstacles in Europe.

Tariffs cannot change these facts.

It only provides the most convenient explanation for "why development is stagnant", that is, to attribute its own failure to external factors, and then package it as determination.

According to these arguments, we find that in fact, the inside of Europe is not monolithic.

Spain's Publico daily clearly pointed out that it is the European people who will ultimately pay for the trade war, and they will bear the impact of rising prices and declining industrial competitiveness. The article criticizes that the EU's protectionism exposes "double standards" - it pursues the free market when it has advantages, and turns to protectionism when the competitive environment tends to be fair.

The Economist in the UK put forward criticism from another angle. In its article "Europe's Industrial Woes Have Nothing to Do With Global Imbalances", the magazine argues that if Europe wants its industry to thrive, the focus should not be on keeping competitors out, but on "solving its own accumulated ills". The article points out that the so-called "diversification" practice of saying goodbye to the cheapest suppliers will only increase costs and harm growth.

A report released by BNP Paribas on October 5 pointed out that trade rebalancing cannot be achieved only through trade means. When Europe responds to the challenge of China's growing strength, it cannot only focus on the bilateral trade balance, otherwise it may repeat the mistakes of the US government. In 2025, the US government regarded the bilateral trade deficit as the core of tariff policy, and even took it as the standard for measuring everything.

The report argues that to truly solve the EU's trade imbalance problem, efforts need to be made in other aspects, two of which are particularly critical.

The first is investment in research and development. In recent years, the gap in R&D investment between Europe and China has widened significantly.

The second is to deepen the construction of the European single market. This is directly related to whether European enterprises can form the economies of scale enjoyed by large leading Chinese enterprises.

Europe must promote transformation from within, substantially increase investment, expand economies of scale, and promote the diversification of export markets.

Since tariffs cannot cure diseases, why is the EU still superstitious about leverage? Because it overestimates its own bargaining power.

The real risk lies internally, and the real way out lies in cooperation

A report by the European Union Institute for Security Studies clamors for the use of "leverage diplomacy" against China, using China's "dependence" on the EU's technology, market and other fields to exert precise pressure on China. The report even instigates the EU to dare to launch a trade war against China, claiming that the cost of taking active actions is much lower than inaction. This report is full of zero-sum game thinking and political prejudice, and tends to bring China-EU relations into confrontation.

It has seriously misjudged China's economic prospects, seriously underestimated the depth of economic interdependence between the EU and China, and even more seriously overestimated the EU's bargaining power.

China adheres to expanding high-level opening-up, the access of foreign investment in the manufacturing sector has been fully liberalized, the negative list for service industry access has been continuously shortened, the intensity of unilateral and independent opening-up has been continuously increased, imports have been actively expanded through platforms such as the China International Import Expo, and the scope of unilateral visa-free access for European countries has been continuously expanded. In contrast, the EU has continuously increased protectionist measures and continuously launched investigations against China's leading enterprises and advantageous industries.

For the drafters of the report, is the only solution for China to unilaterally fully meet the demands of the European side? This condescending attitude makes people can't help but ask, where does the European side get its confidence from?

China and the EU are each other's second largest trading partner. China is the core export destination of the EU's high-end manufacturing, automobiles, precision equipment, medicine and chemical industry, and also the main trading partner of countries such as Germany, France, Italy and Spain.

According to the logic of this report, the EU's import trade volume from China is twice that of China's import trade volume from the EU, and the huge deficit is the best example of the EU's "dependence" on China. Forcing a trade war under the condition of deep embedding will only damage the EU itself. Taking the recently released revised draft of the "Cybersecurity Act" of the EU as an example, according to relevant industry statistics, if Chinese enterprises and equipment are completely excluded in 18 fields, EU countries will bear at least 840 billion euros in losses.

Who will bear this loss? What impact will the EU's green and digital transformation goals suffer? How much more loss will the pockets of ordinary European people have to bear?

The EU is deeply mired in the Ukraine crisis, high energy costs have already made enterprises and consumers complain incessantly, and the military strikes on Iran by the United States and Israel have further intensified the global energy tension.

Since the outbreak of this conflict, EU natural gas prices have risen by 50%, resulting in an additional expenditure of 3 billion euros, and EU industries and people's livelihoods have been further threatened.

Frictions between Europe and the United States continue, and the US tariff war may make a comeback at any time.

While aiding Ukraine to resist Russia and fighting against the United States, it is really puzzling that the official EU think tank even wants to exert pressure on China and even launch a trade war with China.

The analysis of the European Central Bank also found that China is the main supplier of 33 categories of strategic products in the euro area, and in about three-quarters of these product categories, the supply from China accounts for more than 50%. The 2026 survey of the European Union Chamber of Commerce in China shows that 94% of member enterprises believe that China is an important sourcing place, and 48% believe that Chinese enterprises are more innovative than European competitors.

A survey by the Association of German Chambers of Industry and Commerce in early September shows that 83% of the surveyed enterprises feel that the competition from Chinese enterprises has intensified, 88% still want to continue operating the impacted businesses; 60% choose to rely on innovation, 50% choose to reduce costs, and 39% choose to develop new markets.

At the 14th Sino-German Forum, Professor Zheng Chunrong, Director of the German Research Center of Tongji University, said that von der Leyen's speech and the theme of the forum reflect the current realistic picture of China-EU relations.

On the one hand, China and the EU have established a special trade and investment consultation mechanism, carrying out pragmatic dialogues on trade balance, intellectual property rights, export control and WTO reform, focusing on managing differences and resolving frictions; the two sides still have broad space for cooperation in fields such as green transition, technological innovation and climate change.

On the other hand, the differences between the two sides in industrial policy concepts, competition rules, market access and economic security cognition continue to become prominent, and the game in strategic tracks such as new energy, key minerals and digital economy has intensified. The interweaving of competition and cooperation has become the new normal of bilateral relations.

Professor Cui Hongjian from the Academy of Regional and Global Governance of Beijing Foreign Studies University proposed that dissatisfaction with reality and concerns about the future are driving countries to rethink how to build a more perfect global trade order.

Compared with ten years ago, the connotation of trade has undergone tremendous changes: in the past, trade was an important path to resolve domestic conflicts and expand the benefits of international cooperation, but now it has gradually evolved into a tool for great power strategic competition, used by some countries to shift domestic conflicts.

The underlying layer of current trade disputes is more related to the security of industrial chains, supply chains and energy corridors. Such factors are fundamentally reshaping the cost structure of traditional trade.

Professor Ding Chun, Director of the Center for European Studies of Fudan University, analyzed the changes in two-way investment between China and Europe in recent years based on data. Much of the increment of European investment in China comes from profit reinvestment, and green investment has become an important sector of China's investment in Europe. He said that although China and the EU have different concerns on trade and investment, both sides are very clear that the cost of a full-scale trade war is huge, and the impact will spill over to the global trading system.

Jin Ling, Director of the Institute of European Studies of the China Institute of International Studies, believes that China and the EU's cognition of the necessity of industrial policies has gradually converged, and both sides need to coordinate technological innovation, economic competitiveness, national security and social resilience simultaneously.

Moreover, global industrial policy tools are also transforming, from the neutral and non-discriminatory means used to correct market failures in the