With nearly a trillion dollars worth of trade last year, U.S. companies exported more than twice to the EU what they sent to China. In 2024, the U.S. imported about US$606 billion in goods from the European Union and exported around US$370 billion. In comparison, U.S. goods imports from China totaled US$438.9 billion, while exports to China were US$143.5 billion.
Therefore, the U.S. trade deficit with E.U. was US$236 billion compared to US$295 billion with China – even though America-Europe total trade was twice the U.S.-China total trade. The fact that the U.S. bought three times more goods from China than the Chinese from Americans was the reason why Treasury Secretary Scott Bessent was cock sure Beijing would fold quickly at the poker table.
However, it’s also true that the U.S. exports to China was 2.5 times lesser than American companies sold goods to EU, despite the Chinese population (1.4 billion) is 3 times more than Europe (450 million). This simply means the U.S. needs Europe market more than China. In fact, the EU exports to China was €213 billion (US$242 billion), while import amounted to €518 billion (US$588 billion).
So, while the Chinese market is huge, they don’t need American goods as much as they needed European products. The EU’s trade deficit of €305 billion (US$346 billion) with China also means Europe is more important than America to the Chinese. Regardless, based on the U.S. and EU’s massive trade deficits with China, both actually need the Chinese goods more than anyone. Why?
That’s because China is the world’s factory. Today, the Middle Kingdom no longer provides cheap labour to produce low quality goods. For example, a smart factory in Qingdao City, Shandong Province, can make 10 smart refrigerators every minute, thanks to AI tools. Not only Artificial Intelligence has improved gap detection accuracy tenfold – from 0.1 millimetres to 0.01 millimetres, but has also increased production efficiency by 40%.
From low-cost items like toys and clothing to high-value goods such as electric vehicles and smartphones, China’s manufacturing industry retained its position as the world’s largest by scale for the 15th consecutive year – with a total value-added industrial output of 40.5 trillion Yuan (US$5.65 trillion) in 2024. Not bad for a communist country which its industrial sector was only in textiles and mining in 1949.
When the clueless Bessent arrogantly bet – and lost – that Beijing would have no choice but to negotiate with Washington for a deal based on his moronic assumption that China sells three times more to the U.S., he had forgotten that the Chinese manufacturing made up 30.2% of the global total. Tariffs will not bring back American manufacturing jobs ever since China’s manufacturing surpassed that of the U.S. in 2010.
That’s why President Donald Trump was forced to make multiple humiliating U-turns in his tariff war with China – escalating all the way up to 145% only to come down to 30%, without extracting any concessions from Beijing. And since Bessent’s return from a talk with the Chinese officials in Switzerland, he appears to have stopped bragging about winning the trade war with China.
To divert attention from the spectacular failure to suppress and contain Beijing, Trump administration has shifted its attention to European Union. On Friday (May 23), the U.S. president threatened a 50% tariff on the 27-nation bloc’s imports starting June 1, before delaying it to July 9 two days after that. Trump’s officials have complained about Europe’s pussyfooting in trade talks.
It was clearly a delaying tactic when the EU refuses to make concrete offers on issues such as fees for streaming services, value-added taxes, automotive regulations, and fines imposed against U.S. companies in antitrust cases. Washington was also not happy that Europe refuses to join the U.S. in slapping new tariffs on Chinese industries, unlike the United Kingdom.
Part of the reason the U.S.-U.K. trade deal had been sealed was the U.K.’s willingness – and obedience – to impose tariffs on Chinese steel. Trump wanted to use the deal as an example how the European Union could also strike a similar deal with the U.S. – if Brussels also follows orders. The White House realizes that the U.S. alone has very little firepower against China, therefore, it needs to gang up with E.U.
It was not a slip of tongue when Trump said the E.U. is “nastier than China”. Starting in his first term, he criticized North Atlantic Treaty Organization (NATO) member countries for not spending enough money on defense. In February, he said the EU “was formed in order to screw the United States.” Not only Trump was upset with the bloc’s antitrust fines on U.S. companies, he was also angry that the E.U. does not see China as an enemy.
EU officials have sought to find a middle ground in responding to the U.S. that is less aggressive than China’s trade retaliation. And it wants a better deal than Britain, whose trade deal with Washington will still see the U.K. suffers Trump’s 10% across-the-board tariffs. But the E.U. disagrees with the U.S. strategy of pushing trading partners or allies to apply tariffs on China’s good.
European leaders are reluctant to launch a similar aggressive trade war with Beijing the same way Donald Trump did because China remains an important market for EU exports. Besides, it was difficult to determine whether the U.S. president actually intends to follow through on his tariff threat, or it was merely a bluff to pressure Europe to surrender without a fight.
However, compared to China, the E.U. does not have that many cards to play. It was willing to buy more American energy and soybeans, but doesn’t plan to change the bloc’s value-added tax and certainly won’t change health and digital regulations. The fact that Trump had received a call from European Commission President Ursula von der Leyen to request an extension of the 50% tariffs suggests that the E.U. was folding its cards.
Had it been China, it won’t ask for an extension, but would decisively retaliate with a similar 50% tariff on American goods. President Xi Jinping has so far refused to entertain White House’s requests to call President Donald Trump, giving Beijing the bargaining chip and upper hand in any talks or negotiations. That was how Beijing won the trade war – through strength.
Beijing’s strategy is different from the EU, whose leaders were seen begging for mercy. Ursula’s phone call was seen as a weakness, leading to Bessent mocking that Trump’s tariff threat “would light a fire under the E.U.” and speed up negotiations. Crucially, Trump believes the E.U. needs the U.S. more than the U.S. needs the Europe.
While the E.U. exported some 750,000 cars to the U.S. last year, Europe imported only 170,000 cars from the U.S., leading to Donald Trump believes that the U.S. has “all the cards” in trade deals with the E.U. That’s why German Finance Minister Lars Klingbeil has called for “serious negotiations” with the U.S. – the three biggest German carmakers accounted for 73% of EU car exports to U.S. last year.
Even though U.S. companies exported more than twiceto the EU what they sent to China, Trump is able to bully E.U. because not only the European leaders are weak, but also because they have weaker cards than China. While America cannot live without Chinese supply chains and manufacturing hubs, the same cannot be said about Europe’s top exports – pharmaceutical products, motors vehicles and aircrafts.
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May 26th, 2025 by financetwitter
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