What’s happened?

On September 25th the EU’s trade chief, Valdis Dombrovskis, met with He Lifeng, a Chinese vice‑premier, to convene the 10th EU‑China High-Level Economic and Trade Dialogue. The discussions did not signal a significant breakthrough in bilateral trade ties, including in regard to the EU’s planned anti‑subsidy investigation into electric vehicle (EV) imports from China, and we retain our view that new, higher European tariffs on these products are likely to emerge in late 2024.

Why does it matter?

We retain a pessimistic outlook for EU-China ties, primarily as a result of the former’s moves to protect its domestic EV industry. The latest negotiations did not ease these tensions, with the EU reiterating its intent to strengthen its trade defences despite China’s criticisms. We retain our view that EU‑China ties will be under strain over 2024‑28, particularly as European efforts to “de‑risk” its supply chains from the Chinese market gather steam in the coming years.

The dialogue also failed to defuse other areas of building economic tensions. Specifically, the EU drew attention to Chinese market access barriers around procurement, specifically in regard to European medical devices. Long‑standing concerns raised by European businesses have included opacity around licensing delays, as well as de facto barriers in public tenders (which often disadvantage foreign enterprises to the benefit of Chinese state-owned companies). Given the lack of movement on this issue, we now see a growing risk that the European Commission will launch a similar investigation into the medical devices sector, conducted under the guise of the bloc’s new international procurement instrument (which the EU unveiled in late 2022). This could ultimately result in either higher import tariffs or other trade restrictive measures applied against Chinese-manufactured healthcare goods.

Other issues raised by the EU include market barriers to European cosmetics, agrifoods and infant formula, as well as concerns around cross-border data flows, supply-chain resilience and export controls. The revival (and new establishment) of working groups to maintain dialogue on these topics will do little to assuage deepening bilateral frictions. China’s recent advances in semiconductor technology, for example, will prompt a tightening of European export controls (likely at the behest of the US). These actions will continue to weigh negatively on EU‑China relations.

What next?

The announcement of a future EU investigation into China’s medical devices industry may materialise within the fourth quarter. Concrete trade restrictions are unlikely to be implemented until late 2024/early 2025, however, given the necessary administrative timelines for both conducting an investigation and securing EU‑wide backing for such a response.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.