The U.S. wants the EU to be strict with China. But Europe can’t afford it

The United States has stepped up its heavy rhetoric against China, and wants Europe to follow suit. But the bloc can’t quite afford to do the same.

The U.S. administration has been particularly focused on China, having made the topic a dominant feature of international discussions shortly after President Joe Biden took office.

Comments and actions have escalated in recent months. U.S. Commerce Secretary Gina Raimondo, for instance, said Wednesday that Beijing has become a growing threat to U.S. companies.

This message has been shared and acknowledged in Europe. Reports suggested that American officials had told European counterparts to consider using export control restrictions on China. The U.S. Commerce Department was not immediately available for comment when contacted by CNBC Thursday. The U.S. in October imposed restrictions on Chinese access to certain U.S.-developed technologies.

But while the European Union has dubbed China as a “strategic rival” on different occasions, it is pursuing a different approach from the U.S.

“The EU is trying to carve out its own China strategy that is distinct from the U.S. This strategy is about ‘de-risking’ the relationship, rather than ‘de-coupling’,” Anna Rosenberg, head of geopolitics at Amundi Asset Management, told CNBC Thursday.

De-coupling refers to the separation of economic ties between the two superpowers. But, for the EU this is not in its interest.

Data from Europe’s statistics office showed that China was the third largest buyer of European goods and the most important market for imported EU products in 2021. The importance of China as a market for Europe becomes even more relevant at a time when its economy is struggling from Russia’s invasion of Ukraine.

“While the U.S. is trying to pull the EU into its direction to distance itself from China, the EU is keen to maintain economic ties to China. This desire is accentuated by the economic fallout from the war which will affect European economies more acutely next year,” Rosenberg said.

Hosuk Lee-Makiyama, director at the think tank European Centre for International Political Economy, also told CNBC that “there is a lot of suspended demand” in China due to its strict Covid-19 policy and “Europe doesn’t have many markets” to deal with.

He added that European Council President Charles Michel visited China Thursday probably to try to negotiate being “first in the queue” when Beijing eases its Covid measures further.

German Chancellor Olaf Scholz also traveled to China in early November.

“We see the EU-China relationship actually improving in the short term and Michel’s current trip, coming so close after Scholz’s visit to China, is evidence for this,” Rosenberg said.

This comes at a time when the relationship between the EU and U.S. is turning a little sour. Lee-Makiyama said “the transatlantic relationship is at its worst in 20 years.”

European officials have complained about state subsidies that the U.S. administration is putting forward to support the adoption of electric cars. The EU said this challenges international trade rules and is a threat to European companies.

France’s President Emmanuel Macron held talks with Biden on Thursday hoping to bridge some of these differences and avoid a new trade dispute.