On paper it appears logical: the world’s two exporting powerhouses – China and the European Union – might form a united front in response to trade tensions stoked by US President Donald Trump. In reality, the path to closer alignment is far from straightforward, reports Barron's.

Both sides have made tentative gestures. Beijing has lifted symbolic sanctions against five members of the European Parliament, previously penalised for their criticism of China’s treatment of the Uyghur minority in East Turkestan – also known as Xinjiang. Meanwhile, EU officials have quietly floated the idea of replacing tariffs on Chinese electric vehicles (EVs) with a system of minimum import prices the report continues.

However, these moves fall short of abandoning the EU’s current policy of “de-risking” from China, which remains firmly in place. According to analysts in Brussels, the bloc is more inclined to mend transatlantic ties than to draw closer to Beijing. “Lowering barriers against China is not a good idea for Europe,” says Davide Oneglia, director of European and global macro at TS Lombard in the Barron's report. “It’s much more reasonable to be aligned with the US.”

The numbers tell part of the story. Last year, the EU posted a record €198bn trade surplus in goods with the United States. Meanwhile, its trade deficit with China, by contrast, stood at €305bn. As such, “Europe fears that if it strengthens trade ties, it will be flooded by cheap Chinese products,” says Carsten Brzeski, global head of macro at ING Research.

Brussels is also wary of China’s trade practices, having watched its early lead in green technologies like solar panels and wind turbines eroded by what the EU sees as unfair state subsidies. There is similar concern that Chinese EVs, a sector dominated by firms such as BYD could undercut European manufacturers. Beijing’s ongoing support for Russia’s war in Ukraine – a direct threat to the EU’s eastern flank – has further hardened the attitudes of some European officials.

Nevertheless, even minor shifts in the €800bn trade relationship could have significant implications. Should China impose punitive tariffs on US imports, Barron's says, it could open doors for European firms in sectors such as industrial or medical equipment.

Of more strategic consequence, however, is the evolving dynamic in the automotive sector. European carmakers have seen their popularity wane in China in recent years, while Chinese EV brands are gaining traction at a surprising rate in Europe. In response, EU policymakers are attempting to persuade Chinese manufacturers to establish production facilities within Europe – preferably through joint ventures (JV) that would also transfer valuable technology. To date, China has only really been active in automotive JVs in Southeast Asia.

There are signs this approach is gaining traction as Renault and China’s Geely Automobile Holdings have set up a London-based joint venture to produce hybrid and efficient internal combustion engines. In addition the report says, Stellantis – the parent group of Fiat, Peugeot and Chrysler – has partnered with Zhejiang Leapmotor Technology. Meanwhile, Chinese EV giant BYD plans to begin manufacturing at its new Hungarian plant later this year.

Whether the Trump administration’s renewed trade confrontation with Beijing pushes Europe into a tighter partnership with China remains to be seen, especially as China’s neighbour Japan will be pushing both publicly and behind the scenes to prevent Beijing and Brussels from getting too close – particularly in light of the danger such a relationship poses to its own automotive export sector. For now analysts suggest the underlying tensions are unlikely to disappear. “In the long run the EU and China will be competitors,” says ING’s Brzeski. “It’s a deteriorating economic relationship.”