Are Europe and China heading for a trade war?

**Ed Butler** (0:00)
Hi there, I'm Ed Butler. Welcome to Business Daily from the BBC. Today is Europe heading towards a trade war with China?

**SPEAKER_2** (0:08)
The trade as we have it right now between China and Europe is simply unsustainable. I mean Chinese export increased by 50% and our exports to China decreased by 30%. We are going to fight tooth and nail for every factory, for every job in the European Union.

**Ed Butler** (0:25)
Yes, in recent months the EU has been raising increasing concerns about what they say is Chinese dumping of its goods on Europe's markets. How bad will this argument over trade become?

**Finbar Birmingham** (0:38)
The consensus I hear in Brussels these days is that if you don't do anything, you are going to end up with a hollowed out manufacturing sector where the question marks remain as whether they have the speed and the capacity to do what is required to actually deal with it.

**Ed Butler** (0:53)
The drumbeat of trade war. That's Business Daily from the BBC.
China is going through an extraordinary export boom right now. It's driven by automation. Like this, lines of robots, self-driving forklifts whizzing around a human-free warehouse. Geek Plus is the Chinese firm selling some of this advanced robotics to factories both at home and abroad. Yan Yu Liu is its head of communications.

**Yan Yu Liu** (1:31)
Right now, what we see in the market is most of the companies in the world, they realize they see the trend of automation and they use smart robotics to transform their logistics.

**Ed Butler** (1:46)
But is this Chinese export boom being driven not just by high-end tech, but by massive government grants and other allegedly unfair trade practices?

**Finbar Birmingham** (1:57)
There has been a massive surge in Chinese imports into some of the most important sectors in the European economy. There is a suspicion in Europe that this is partly coming from undeclared subsidies and overcapacity in the Chinese economy.

**Ed Butler** (2:11)
That's Fimba Birmingham. He's a senior Europe correspondent for the South China Morning Post. To demonstrate the growing European angst, he points to a recent outburst by the chief executive of the Federation of German Industries, who spoke recently of a new China trade shock disrupting Europe's firms.

**Finbar Birmingham** (2:30)
What we're seeing now is a much more significant and higher level of China shock in Germany because it's really core industries like engineering and machine tools and automotive of course is at the heart of this. Germany is so heavily invested in China, it is by far and away Europe's largest trading partner with China. So they've been quite reluctant to take any measures. But when the chair of the BDI is describing it as the China shock 2.0, to me it really feels like a moment in time, a line in the sand.

**Ed Butler** (3:00)
Is there a perception that this China shock for Europe is that much worse because of the tariff regime introduced by Donald Trump last year? In other words, China has diverted its exports and focused them more on Europe because of a relative closure of the US market.

**Finbar Birmingham** (3:21)
That's certainly been a factor. I mean, the European Union is really the last rich market that's almost fully open to Chinese exports. As you mentioned, the United States has gradually been closing its market.
You know, and so China has refocused its economy away from property into these new productive forces, making these sort of high tech, high end goods like electric vehicles, batteries, many parts of the world like Turkey, India and others have put up high tariffs, whereas the European Union has been a bit more reluctant to weaponize their giant single market.

**Ed Butler** (3:57)
Well, Finbar Birmingham refers there to electric vehicles. Back in 2024, Europe introduced sectoral tariffs of up to 45% against some Chinese car makers after a massive industrial surge that has seen a five-fold increase in the export of Chinese EVs. But the trade barriers haven't made that much of a difference, it seems. Europe's importing more Chinese EVs than ever this year, with ongoing accusations that China is dumping subsidised cars on to the EU market. Brad Setzer is a China analyst at the US Council on Foreign Relations.

**Brad Setser** (4:34)
The increase in China's auto exports of all kinds, with mostly EVs this year, will be above three million cars, or could be three and a half because you're seeing an acceleration. If it's three and a half, that is equal to Germany's total exports. And that's just the change in a year.
China has to be taking market share in a big way, not just in small corners of the global economy, but in parts of the global economy that are core to key trading partners like Germany.