What the US-China Trade War Means for European and UK Firms

Chinese exporters and trade specialists are adopting a wait-and-see approach amid the escalating U.S.-China trade war, participants at a business roundtable said on Friday. 

“Most exporters and importers between the U.S. and China don’t have too much choice but to wait,” said Steven Jou, project manager at Charles Kendall Freight. “All people, including myself, have faith that positive negotiations will take place very soon.” 

The roundtable, organized by the British Chamber of Commerce in South China’s Supply Chain Working Group, was hosted at Shenzhen’s Yantian Port as markets reeled from last week’s tariff announcements. It brought together business leaders from the U.K. and China, along with government representatives from the British consulate in Guangzhou.

Kinyu CEO Benjamin King, who chairs the working group, said, “We’d been planning this for months, but it couldn’t have come at a better time. It gave everyone a chance to compare notes on surviving this trade crisis.” 

Last week, markets plunged after Trump announced global tariffs. They partially recovered when the administration backpedaled, limiting steep duties to China only. The global economy may have dodged a bullet, but U.S.-China ties are in free fall. 

As Columbia University professor Adam Tooze put it: “We have been asking for some time what is Trump’s China policy. Here we have our answer” – a “radical decoupling from China.” 

But if this is decoupling – and with tariffs now at 145%, it surely is – many participants at the roundtable said all they could do was cling to hopes for better news. 

“There’s no effective way to cope with these tariffs,” said one company representative who handles Chinese imports into the U.S. “I’m frankly quite sad.”

The traditional strategy of routing exports to the U.S. through third countries is also becoming increasingly difficult, participants reported, just as we predicted it would last year.  

The European Pivot 

With prospects in the U.S. looking bleak, Chinese manufacturers at the roundtable said they plan to shift exports to other markets. 

“If it’s a choice between an EU customer or a U.S. customer, we pick the EU,” said a Chinese exporter. “We’ve been doing that for a while.” 

Jou agrees this shift is likely to accelerate but won’t happen overnight. 

“In theory, suspending business with the U.S., China’s largest trading partner, will increase trade with other countries,” Jou said. “But that will not come too soon. We’ll have to watch for a while.” 

Yet, the prospect of a second “China shock” is already alarming some in Europe. For instance, British retailers called for government action on Monday to stop Chinese companies inundating the U.K. with products. 

The European Commission is also monitoring import levels and says its ready to intervene if it detects a surge from China, according to DW reporting last week. 

However, the last thing European businesses operating in China want right now is more trade tensions. 

Thankfully, both Brussels and London appear deeply reluctant to copy Trump’s sledgehammer approach with their own tariffs. After all, nobody wants a fight with Beijing amid collapsing transatlantic relations. 

If any retaliation occurs in response to a surge in exports, it will likely be more targeted — and less likely to provoke Zhongnanhai — think minimum prices on Chinese EVs rather than sweeping tariffs. The U.K. could also drop the tax exemption on imports under 135 pounds ($178), according to CNBC. 

The overall trajectory points to closer ties with China. The EU’s determination to maintain strong relations is clear, with leaders set to travel to Beijing in July instead of hosting the summit in Brussels as planned. 

Spanish Agriculture Minister Luis Planas also bluntly told Reuters last week that Spain will pursue closer trade ties with China “in the interests of its citizens and the EU,” dismissing U.S. warnings from U.S. Treasury Secretary Scott Bessent that such moves would be tantamount to “cutting your own throat.” 

Supply Chain Disruptions 

But that doesn’t mean companies won’t face challenges when sourcing from China. 

China’s manufacturing sector is about to take a serious beating, with U.S.-bound shipments projected to nosedive by a staggering 80% over the next two years, according to Capital Economics. The consequences are already hitting European buyers. 

One thing to look out for will be Chinese suppliers raising prices to offset lost U.S. sales.

Some outlets are already reporting that this is happening. One U.K. swimwear brand told The Independent that its China sourcing costs have nearly doubled, with the assumption being that this was due to Chinese suppliers trying to recoup their American losses. 

Victor Shih of UC San Diego also warns the tariffs could trigger a “wave of bankruptcies” across China. With the country’s property market struggling and local government finances under pressure, Beijing has limited capacity to bail out struggling manufacturers. 

Therefore, some European firms will likely lose key Chinese suppliers. This will cause a world of headaches.

It might be worth giving your suppliers a quick ring to check how much they’ve been selling to Uncle Sam and having a Plan B ready if they go belly-up. 

Finding Opportunity in Crisis 

Despite the challenges, Jou sees some positive developments emerging from the crisis. 

“This was the largest roundtable I’ve ever attended by the British Chamber of Commerce in South China,” he noted. “It’s a good sign of growing interest in supply chain issues.” 

Jou believes the disruption is creating new connections across the industry. “People are seeking more opportunities and business partners in this abnormal situation. That makes our job more valuable in bringing everyone together.” 

“Unfortunately, we did not have all the answers to the world’s supply chain problems, but all the attendees were relieved to know that they were not facing this challenge alone,” King said.