As China and the U.S. redefine geopolitics, Europe faces a win-win situation

Europe may soon find itself in the best position as the US contemplates breaking away from China.

U.S. President Joe Biden has taken a tough tone on China for most of his term, calling the world’s second-largest economy a most serious competitor to America.Earlier this year, Washington accused Beijing of using spy balloon Get intelligence from US military websites.

“The U.S.’s tough policy stance toward China means China needs to improve its relationship with Europe to mitigate the impact of export controls. Therefore, China has an incentive to work hard to improve its relationship with the EU,” said Anna Luo, head of geopolitics at Amunicari Institute Anna Rosenberg, told CNBC via email.

European officials have taken a slightly different approach from the Biden administration, preferring to take a softer stance toward Beijing, acknowledging its importance to the European economy. According to Eurostat data, China is the third largest buyer of European goods During 2021.

“The EU is in a very different position than the US, which is clearly pursuing a policy-led disengagement from China,” Jacob Kirkgawer, a nonresident senior fellow at the Peterson Institute for International Economics, said by email.

“From China’s perspective, the EU is the most important high-income market and it remains largely unfettered. This in turn makes it much less likely that China will actively try to restrict trade with the EU,” He said, adding that China “has a lot to lose in a trade war with the EU.”

In recent months, European Commission President Ursula von der Leyen has been pushing a policy of de-risking from Beijing – reducing reliance on China in key sectors such as raw materials and semiconductors. However, European officials do not support a clean break in economic and diplomatic relations.

“The political need to de-risk China-EU relations is entirely different from that of U.S.-China relations. In a world characterized by U.S.-China rivalry, the EU is the most important economic partner for both sides — and this brings huge political benefits to the EU as opposed to Beijing and China. Washington,” Kirkgaard added.

According to the European Council, the EU’s single market is home to 23 million companies and more than 450 million consumers, with goods and services flowing freely across borders.

“We don’t want to fuel U.S.-China competition,” an EU official told CNBC on condition of anonymity due to the sensitivity of the situation. “We prefer to calm things down … rather than be naive,” the same official said.

The U.S. softened its rhetoric on China after a meeting of G7 leaders over the weekend, with Biden warming to the concept of de-risking rather than a complete disengagement from the world’s two largest economies.

Beijing would not like the idea of ​​G7 leaders getting together to criticize China’s policies. After the meeting, China banned its companies from buying products from U.S. chipmaker Micron.

Alicia García-Herrero, a senior fellow at European think tank Bruegel, said Europe may not be in an easy position amid U.S.-China tensions.

“I’m actually very skeptical that’s going to happen,” she said of the prospect of economic ties with Europe that both Washington and Beijing want.

“China is taking a lot of retaliatory actions against Europe in many ways, and the feeling that Europe is increasingly dependent on China — this strategic dependence on green energy is becoming more and more apparent,” she said, noting that Beijing is aware of its The influence of Europe wants to develop a more sustainable economy. China is the largest supplier The world’s use of several key raw materials, which are used in products such as electric vehicles, according to a study published by the European Commission.