China and EU Trade Relations Hit New Low Amid Retaliatory Measures

In an escalating trade standoff, China announced on Sunday, July 6, 2025, a sweeping ban on European medical device companies from bidding on public procurement contracts exceeding 45 million yuan ($6.28 million). The move, which Beijing describes as a countermeasure, comes days after the European Union implemented similar restrictions on Chinese firms. This tit-for-tat escalation signals a deepening rift between two of the world’s largest economic blocs.

Background: A Longstanding Trade Dispute

The trade tensions between China and the EU are not new. Over the years, the European Union has accused China of implementing protectionist policies that exclude EU-based firms from its lucrative public procurement market. In June 2025, the EU announced that Chinese companies would no longer be eligible for government contracts exceeding €5 million ($5.89 million). This measure, as reported by France 24, aimed to pressure Beijing into lifting its barriers against European firms. The EU alleged that China had established “significant and recurring legal and administrative barriers” to its procurement market.

In response, China has repeatedly expressed its willingness to resolve these issues through dialogue. However, a spokesperson from China’s Ministry of Commerce criticized the EU for ignoring these overtures and instead erecting “new protectionist barriers.” This retaliatory ban is the latest manifestation of this growing discord.

China’s Retaliatory Measures

China’s new restrictions, announced by the Finance Ministry, explicitly bar European medical device manufacturers from participating in government contracts above the 45 million yuan threshold. However, the restrictions exempt European companies that have invested in China and manufacture their products locally. As noted by Times of India, this exception underscores Beijing’s strategy to encourage foreign direct investment while retaliating against the EU’s measures.

Additionally, China has imposed anti-dumping duties on European brandy, including French cognac, as part of its broader strategy to counteract what it perceives as unfair trade practices. Although these duties come with exceptions for major producers, they mark another flashpoint in the strained China-EU trade relationship.

Broader Implications and Ongoing Disputes

The medical equipment ban and brandy tariffs are not isolated incidents. China and the EU are locked in a series of trade disputes spanning multiple industries. For instance, earlier this year, China launched investigations into European pork and dairy imports, actions widely seen as retaliatory following EU duties on Chinese electric vehicles. These measures have compounded tensions, with both sides accusing the other of escalating the conflict.

According to Associated Press, the EU’s restrictions on Chinese firms aim to address what it sees as discriminatory policies. However, Beijing argues that such measures undermine mutual trust and cooperation. “China has no choice but to implement countermeasures,” stated a Ministry of Commerce spokesperson, emphasizing that Beijing remains open to resolving disputes through negotiation.

The Road Ahead

The deepening rift between China and the EU poses significant challenges for global trade. Both economic powers are key players in the international market, and their disputes have far-reaching implications. Analysts warn that prolonged tensions could disrupt supply chains and slow economic growth in both regions.

Efforts to resolve these disputes through dialogue appear to have stalled for now, as both sides dig in their heels. The EU’s measures aim to protect European interests, while China’s retaliatory actions signal its unwillingness to capitulate to external pressure.

The escalating trade war between China and the EU underscores the complexities of modern global trade. As both sides weigh their next moves, the international community watches closely, hoping for a resolution that benefits all parties involved.