Macron warns China of possible EU tariffs as trade deficit soars

During a recent state visit to Beijing, Emmanuel Macron issued a stark warning to Beijing: if European Union (EU) member states do not see a change in trade imbalances, the bloc may be forced to levy new tariffs on Chinese goods.

Macron has in the past sought to project a robust European front in dealing with China, while being careful not to antagonize Beijing, whose growing assertiveness is testing trade, security, and diplomatic ties, analysts say.

Noah Barkin, a China analyst with Rhodium Group, recently said Macron must make it clear to China’s leadership that Europe will respond to growing economic and security threats from Beijing, while preventing an escalation of tensions that could lead to a full-blown trade war and diplomatic breakdown.

“This is not an easy message to deliver,” Barkin said.

In an interview published on Sunday by the French daily Les Echos, Macron said he urged China to increase cooperation on what he called “unsustainable” global trade imbalances, as well as on geopolitical issues and environmental concerns.

“I tried to explain to the Chinese that their trade surplus is unsustainable because they are killing their own customers, particularly by no longer importing much from us,” Macron said in an interview published on Sunday by French daily Les Echos.

“I told them that if they do not react, we Europeans would be forced, in the coming months, to take strong measures following the example of the United States, such as imposing tariffs on Chinese products,” he added.

Economic risks mount as trade deficit threatens European industry

The European Union’s goods trade deficit with China has increased almost 60% since 2019; France’s trade balance with the $19 trillion economy continues to widen. Macron had long advocated for a unified European stance on China and had been calling for measures to protect European producers from Chinese imports. 

Macron said the U.S. protectionism and China are both striking at the core of our industrial and innovation model. And that, he said, was the worst-case scenario: he added that they had become the adjustment market. Macron warned that it was a matter of life or death for European industry.

If the trade imbalance persists, analysts caution, Eurozone GDP growth could be significantly affected. Countries with well-established industrial sectors, including Germany, France, Italy, and Spain, face significant vulnerabilities because the influx of cheaper Chinese goods could undercut domestic manufacturers and reduce profits in crucial sectors. 

There’s more risk than just trade. Persistent deficits could weaken innovation capacity, as European firms face fewer resources to invest in research and development, possibly leading Europe to fall behind in high-tech sectors. Economists also suggest that the imbalance would exacerbate regional economic disparities in the EU, making a unified approach more challenging. Ongoing exposure to Chinese competition, according to some forecasts, could reduce Eurozone GDP growth by as much as 0.5 percent over the next decade.

Macron urges China to invest and open markets

Macron also said he was proposing a more conciliatory approach towards China, such as the dismantling of restrictions on European exports of semiconductor machinery and limitations on Chinese exports of rare earths.

He encouraged Chinese companies to invest in Europe and to “create value and opportunities for Europe.”

Macron highlighted that partnerships with Chinese firms could help modernize key industrial sectors, while also promoting sustainable development and technology transfer.

Partnerships with Chinese firms, according to Macron, will facilitate the modernization of key industrial sectors and promote sustainable development and technology transfer. Macron also pitched the approach as a win-win situation: Europe is provided with capital and high-tech collaboration, while Chinese investors, through skilled labor and established markets, gain access.

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