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The EU, a political project aimed at removing trade barriers, is raising tariff walls at the fastest pace in 15 years. But just as quickly builds up defenses against cheap Chinese imports, a new storm once again throws the bloc out of balance.
For example, President Donald Trump’s threat to impose tariffs of up to 60% on Chinese goods would create an even higher wall of tariffs around the United States than the EU is planning.
If the US president follows suit, the effect would be to divert Chinese goods from the US to the EU, forcing Brussels to consider hitting back with even tougher defensive measures.
This is an impossible situation for a labor union that has prided itself on its free trade instincts. Any barrier created may save some domestic jobs, but it will also make other domestic industries less competitive by raising the price of imported goods.
China currently accounts for 30% of global industrial output, and the spillover effects on EU products, from electric cars to Italian tomato paste, will be significant.
Vulnerable industries such as steel and fiberglass manufacturers complain that the EU is not building trade defenses fast enough or high enough to save them. “We are approaching a tipping point for many industries,” said Laurent Roussmann, partner and trade defense expert at RB Legal.
Meanwhile, companies such as paint manufacturers that rely on cheaper Chinese products to keep their products cheaper are lobbying against the tariffs. The EU has imposed tariffs on titanium dioxide, a key ingredient, and paint makers fear sales will decline if they don’t absorb the costs.
Simon Evenett, professor of geopolitics and strategy at IMD Business School, said tariffs always end up hurting consumers and other businesses.
“Europe’s dilemma is to either impose tariffs on Chinese imports and sacrifice downstream jobs, or do nothing and watch EU producers shrink. When it comes to principles, someone’s cow is always stabbed.”
But Aegis Europe, which represents heavy industries such as steel and chemicals, insisted the EU was sticking to the status quo.
According to Aegis, trade defense measures cover far fewer EU imports than in other trading blocs. The number of tariffs has increased to the highest level since 2009, with 141 tariffs coming into force in 2023. However, based on total imports, the United States, Australia, and Canada have 10 times more protective shields.
“Claims that EU manufacturers are using trade defense as a protectionist tool do not stand up to scrutiny,” the report said.
Brussels complied. At Aegis’s request, imported goods are now automatically registered once a trade investigation is initiated. Tariffs can then be lifted if desired, preventing stockpiling during a months-long investigation to combat rising prices.
But even when tariffs are imposed, China tends to find ways around them. Since the EU imposed anti-subsidy tariffs on glass fiber used in construction, wind turbines and other industries in 2010, Chinese manufacturers have doubled their market share.
After the tariffs were imposed, imports from Egypt began to increase rapidly. Chinese state-owned Jushi opened a factory there, and Brussels eventually imposed tariffs on Egypt as well.
Ludovic Pillow, chief executive of producer 3B and president of Glassfiber Europe, said the tariffs were ultimately too low. “Companies operating in a market economy like ours cannot withstand relentless attacks from competitors who receive subsidies from the Chinese government,” he said.
The steel industry is suffering the most, hampered by weak demand, high energy costs and regulations forcing it to invest in cutting carbon emissions.
Steel production reached a record low of 128 million tonnes in 2023, according to lobby group Eurofer. Trump imposed tariffs on metals during his first term to protect voters in America’s industrial heartland, and could reinstate them within days of his return.
“We have to decide whether we want a European steel industry or not,” said Axel Eggert, Eurofer’s director general.
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Eggert argued that automakers themselves, currently partially shielded by tariffs from a surge in cheap imports of allegedly subsidized Chinese electric cars, still need EU steel. . They may be tempted by cheaper Chinese products to lower costs, but “as soon as we’re gone, the Chinese will raise prices.”
The EU may be tempted to restart talks with the United States on a “green steel club” that would allow tariff-free trade between member states, with non-member states paying duties.
This was previously rejected by Brussels as not complying with World Trade Organization rules. But EU officials are now hinting that the rules could be interpreted flexibly.
In this hostile environment, even those well-educated in trade multilateralism may find it impossible to defend their principles.
