China Europe Trade Tensions Escalate Over Medical Devices

China and the European Union are experiencing a strained relationship, despite both facing trade tensions with the U.S. under President Donald Trump. The recent escalation involves a dispute over government procurement of medical devices, with both sides imposing restrictions on each other's products.

European Commission President Ursula von der Leyen called for a "genuine rebalancing" in the China-Europe relationship, criticizing China's practice of flooding global markets with subsidized overcapacity and discriminating against European products. Beijing responded by accusing Europe of having an unbalanced mentality.

The dispute began when China announced it would stop procuring European medical equipment for contracts exceeding $6.3 million in value and restrict access to non-EU companies with over half the contract value coming from importing EU components. This move was in retaliation for the European Union's decision to stop buying Chinese-made medical devices for contracts worth more than $5.8 million, citing China's unfair exclusion of European medical devices from Chinese government contracts.

This tit-for-tat action is part of a broader trade conflict between China and Europe, which includes Beijing imposing anti-dumping taxes on European brandy and threatening or imposing tariffs on European dairy and pork products. These measures followed the European Commission's imposition of an anti-subsidy tariff on Chinese-made electric vehicles.

Despite facing high U.S. tariffs, China and Europe have struggled to find common ground. U.S. tariffs on China stand at 55%, while European goods face a 10% tariff upon entering the U.S., with higher tariffs on specific goods. In theory, U.S. pressure should drive these economies to forge new trading links, but in practice, Beijing and Brussels have found it challenging to do so.

One significant point of contention is China's control of rare earths, which are crucial for electronic components and batteries. China has imposed controls on rare earth exports, leading to a significant drop in exports to Europe. Additionally, Europe accuses China of "overcapacity," where China relies on excessive manufacturing to support economic growth, leading to cheap exports flooding European markets.

The two regions also disagree on how to handle Russia’s invasion of Ukraine, further complicating their relationship. Other economies in Asia have considered or imposed targeted measures against Chinese products, such as steel, adding to the complexity of the situation.