USA-China-EU: Between Cooperation And Fragmentation In Global Trade – Analysis
By IFIMES
Key Takeaways:
- US-China-EU trade relations in 2026 were marked by escalating tariffs and geopolitical tensions, with Trump’s administration imposing high tariffs on both China and the EU, leading to a 16.6% drop in US-China trade while China strengthened ties with ASEAN and the EU.
- Chinese firms in the US demonstrated resilience despite tariff impacts: 79% reported negative effects, but 73% maintained investments, 81% remained profitable, and reinvestment willingness hit record levels (79%), showing long-term commitment.
- The article warns of increasing fragmentation (technological decoupling, parallel ecosystems, regulatory barriers like the EU’s CSA2 and IAA), which raises costs and slows innovation, urging a shift toward pragmatic cooperation on global challenges like climate, AI, and supply chains rather than protectionism.
By Paweł Gałecki
The contemporary international trade system has reached a critical juncture where economic logic yields to geopolitical imperatives. Relations among the USA, China, and the EU shape not only the flow of goods but the foundations of global stability. The year 2026 brought an intensification of tensions, revealing deep contradictions between declared cooperation and the reality of protectionism.
The year 2025 will be remembered as a period of unprecedented escalation of tariff barriers. The second Trump administration introduced tariffs that reached levels threatening bilateral trade. In May, the parties established a 90-day ceasefire, and in November at Davos, tariff reductions were extended through November 2026. Analysts emphasize that stable economic ties among China, the USA, and the EU are fundamental for protecting global supply chains. However, data from the first quarter of 2026 shows clear shifts: USA-China trade declined 16.6% to $128.68 billion, while China’s trade with ASEAN grew 18.4%, and with the EU 17.6%. Despite these turbulences, the fundamental complementarity of the economies remains unchanged. Carlos Gutierrez, former US Secretary of Commerce, stated that if both sides established a framework for coexistence, it could serve as a model for the global system.
Resilience and Fragmentation: Chinese Enterprises Navigating Tariffs, Geopolitics, and Long-Term Commitment in the US Market
According to the 2026 China General Chamber of Commerce – USA report, 79% of Chinese firms in the USA reported negative tariff impacts on their operations. The most common consequences were rising import costs (39%), margin compression (27%), and supply chain disruptions (24%). Tariff uncertainty affected investment decisions; 12% of firms delayed or minimized expansion plans. Most striking was the trend of “position maintenance”: 73% of firms reported no changes in investments, compared to 53% the previous year. Practical examples, however, demonstrate the durability of cooperation. Fujian Zhongjing Petrochemical imported 308,000 metric tons of propane from the US in the first four months of 2026 (34.8% of total imports). JAC Auto Parts reported 30% year-over-year export growth to the USA, reaching 40 million yuan. Yang Weiguo from JAC stated that automotive markets in China and the USA remain complementary, and stable relations are essential for development.
Fifty-five percent of firms assessed that conditions deteriorated in 2025, including 21% significantly. Chinese enterprises demonstrated adaptive capacity: 33% achieved revenue growth, 81% remained profitable. Positive business environment assessments fell to 9% the lowest level since 2018-2020. Particularly striking was the growth in high-margin firms. Enterprises with EBIT margins above 15% increased from 7% in 2024 to 21% in 2025 the highest level in survey history. This signals operational resilience among firms leveraging competitive advantages. Simultaneously, 27% experienced revenue decline, indicating polarization. Despite difficulties, willingness to reinvest reached a record 79%. Half of firms planned to reinvest all profits in the USA, another 29% the majority. This underscores long-term commitment despite emerging barriers. Business objectives reflect a defensive orientation: “rebuilding and developing existing business” ranks first (61%), replacing “improving profitability.” Six percent chose “exit from the US market,” compared to no such declarations in 2025.
According to the 2026 CGCC Report: 82% of firms cited geopolitical uncertainty as the main obstacle to brand building, far exceeding other barriers. Brand recognition has a “pyramidal” character; 70% of firms acknowledged not reaching mainstream American brand levels, 69% reported recognition mainly within Chinese business circles. Fewer than 30% entered the competitive landscape of local brands. Firms indicate that customers value price-to-quality ratio (76%) and product quality and safety (59%). In brand narratives, product quality dominates (68%), followed by collaboration with local partners (43%) and contributions to employment (38%). Emotional elements (23%) and local innovation (25%) are less developed. Firms indicate that most effective for building trust are: partnerships with American companies (62%), product excellence (62%), and emphasizing local employment (59%). Looking ahead, the greatest impact will come from: geopolitical de-risking (54%), AI-driven marketing (49%), and brand value (38%). In practice, firms plan to increase digital marketing investments (41%) and expand decision-making authority for US units (33%). US macroeconomic uncertainty (70%), bilateral tensions (64%), and trade friction (56%) remain primary challenges. “Inflation and instability” ranks first, particularly in the context of the Middle East conflict, which drove oil prices up by one-third.
Escalating Trade Wars and Regulatory Fragmentation: The EU–US–China Triangle at a Crossroads of Industrial Policy and Technological Decoupling
On May 2, 2026, President Trump announced his intention to raise tariffs on EU automobiles from 10% to 25%, accusing the bloc of non-compliance with the July 2025 Turnberry agreement. Trump stated that the new tariff would force the EU to accelerate production relocation to the USA, revealing the true intention – forced reindustrialization. Currently, most EU exports to the USA are subject to a 10% tariff, introduced after the Supreme Court struck down the 15% tariff, ruling the President lacked authority. The Turnberry agreement itself was controversial: it provided for zero tariffs on US exports to the EU and 15% on EU exports to the USA, with production relocation requirements. On May 7, the European Parliament and Cypriot Presidency attempted to finalize an agreement, but without breakthrough. Member states remain divided. Parliament demands safeguards conditioning tariff reductions on US compliance and a sunset clause in March 2028. France supports safeguards, while the German-led bloc prefers the agreement as established.
Bernd Lange, Chair of the EP Trade Committee, stated that higher tariffs are “unacceptable” and that the USA “constantly violates commitments.” Kyriakos Pierrakakis said Europe is ready to respond, though dialogue remains the priority. Potential escalation could affect trade worth $2 trillion annually. Potential 25% tariffs would particularly hit German premium manufacturers: VW, BMW, Mercedes, and Porsche. The situation places European industry before a dramatic choice – relocation entails enormous costs and efficiency losses, while maintaining production with 25% tariffs may render vehicles uncompetitive.
While the EU defends itself against American tariffs, it prepares its own measures against China. The proposed Cybersecurity Act amendment (CSA2) introduces the concept of “non-technical threats,” enabling arbitrary exclusion of suppliers from 18 key sectors. A May 7, 2026 CCCEU and KPMG report warns that regulations could cost the European economy €367.8 billion over five years – equivalent to nearly two years of the EU budget. The greatest burden would fall on Germany (€170.8 billion), France (€46.3 billion), and Italy (€36.5 billion). Liu Jiandong, CCCEU Chairman, characterized the criteria as contradicting principles of equality and non-discrimination. The report indicates that exclusions may violate bilateral investment agreements and WTO principles, threatening claims and disputes. Forced supplier replacement will not benefit cybersecurity but will redirect innovation budgets to infrastructure replacement costs, increase fiscal burdens, and raise consumer prices. In energy, it will delay transformation; in transport, slow decarbonization; in telecommunications, raise 5G costs. China’s Ministry of Commerce warned that the decision will weaken trust, harm cooperation, and undermine supply chain stability.
The Industrial Accelerator Act (IAA) containing “Made in EU” origin requirements and introducing specific vehicle requirements (must be assembled in the EU, at least 70% of component value must originate from the EU, and battery cells must be produced in the EU) significantly points to “In Europe for Europe” solutions. China’s Ministry of Commerce (MOFCOM) formally submitted comments to the European Commission on April 23, 2026, expressing serious concerns about the IAA. China characterized the regulation as containing discriminatory origin requirements, foreign investment restrictions with disproportionate impact on Chinese enterprises. The Ministry warned that EU decisions will compel it to take necessary measures to protect legitimate rights and interests of its firms. EU import market monitoring results showed for Q1 2026 increased imports of goods from China, particularly in textiles, chemicals, and metals sectors. The EU Council decided in 2025 that from July 1, 2026, all small shipments from third countries will be subject to a fixed tariff rate of €3. New regulations apply to parcels valued below €150 and will cover approximately 93% of all e-commerce flows to the EU. The charge is temporary and will remain in effect until implementation of the target EU customs system, likely from 2028.
Stakeholders focusing energy on tariff skirmishes should emphasize cooperation in AI and pioneering technologies. Common interests in open-source AI, big data, quantum computing, 6G, robotics, green transformation, and biotechnology are important for global development. In the context of challenges such as climate change, energy security, and pandemics, technological cooperation becomes a necessity. However, reality shows fragmentation. Export controls on semiconductors, AI restrictions, and firm exclusions create parallel technological ecosystems that may be less efficient and more expensive. Duplication of R&D efforts, standards fragmentation, and restricted talent flows may slow global progress. An example is 5G and 6G development. Chinese firms like Huawei and ZTE have achieved advances and offer competitive prices but are being excluded from Western markets. This forces countries toward more expensive alternatives, delaying deployment. Simultaneously, China develops its own standards, leading toward a world with two incompatible systems. In AI, export restrictions on advanced GPU chips aim to slow development of Chinese capabilities. History shows that restrictions stimulate domestic innovation and lead to greater technological independence. China has increased investments in domestic semiconductor production and alternative computing architectures. Paradoxically, while governments introduce barriers, enterprises continue seeking cooperation. This divergence between government policy and business interests will shape the future of the global technological landscape.
Between Cooperation and Fragmentation: The Strategic Future of the USA–China–EU Economic Triangle
Analysis of the USA-China-EU triangle reveals a fundamental contradiction: economic logic and mutual interdependence mandate cooperation, political imperatives lead to fragmentation. The intensity of this contradiction has reached a level threatening global stability and requires rethinking assumptions about international trade. Key findings indicate several trends. Despite escalation, fundamental complementarity remains unchanged. China is essential as a manufacturing and innovation hub for Western firms; access to Western markets remains crucial for China. Despite a 16.6% decline, USA-China trade reaches $128.68 billion quarterly, testifying to deep integration. Enterprises demonstrate resilience and adaptation. Record reinvestment levels despite deteriorating conditions show long-term commitment. Protectionism under the guise of national security is becoming the dominant tool in both the USA and EU, threatening the multilateral system. The CSA2 amendment (€367.8 billion in costs) and vehicle tariff threats (25%) show that fragmentation extends to transatlantic relations, creating a spiral.
Lack of verifiable evidence of technical threats suggests that politics prevails over economic rationality. Tariff escalation serves as a tool of pressure and forced relocation, not a response to specific violations. Fragmentation costs are asymmetric. Protectionism is not a zero-sum game—everyone loses, though some more than others. Smaller EU economies may be more susceptible to pressure, weakening bloc cohesion. Simultaneous pressure from the USA and EU places Chinese firms before an unprecedented challenge of navigating multiple regulatory environments. This requires not only resources but fundamental rethinking of global strategies and resource allocation. Prospects remain uncertain. On one hand, signals from Davos and partial ceasefire offer hope for stabilization. Visits by American and European business leaders, declarations preferring cooperation indicate that business communities are pressuring policymakers toward pragmatism. On the other hand, structural geopolitical tensions, technological rivalry, and uncertainty about global order complicate long-term planning. For enterprises, adopting strategies balancing political risk with business objectives becomes crucial. Increased localization, supply chain diversification, building local partnerships are foundations of future resilience. Firms effectively navigating this environment will have competitive advantage. Particularly important is developing rapid adaptation capabilities. Enterprises should invest in early warning systems enabling anticipation of regulatory changes. Building relationships with local stakeholders – authorities, communities, partners—can provide protective buffers. Geographic diversification can reduce dependence on single regions and increase shock resilience.
For policymakers in Washington, Beijing, and Brussels, understanding that long-term stability cannot be built on mutual exclusion is crucial. Rational dialogue, transparent technical standards, mutual verification, and dispute resolution mechanisms should replace arbitrary political criteria. History shows that protectionism rarely achieves intended goals and leads to unintended consequences harming all parties. New cooperation frameworks are needed that acknowledge security concerns but prevent their abuse for protectionist purposes. Cooperation in areas of global challenges is particularly urgent. Climate change, health security, cybersecurity, and food security recognize no borders and require coordinated responses. Technological fragmentation hinders cooperation and may slow progress. Green transformation will be more expensive and slower if implemented in isolated national or regional ecosystems. The question is: will leaders have the vision and courage to prioritize long-term stability over short-term political gains? Will business communities effectively articulate interests and influence trade policy? Will multilateral mechanisms regain significance in regulating global trade? The answers will determine the future not only of trade but of global cooperation in facing common 21st-century challenges. The year 2026 showed that the world stands at a crossroads between fragmentation and renewed commitment to rules-based cooperation. Choices made in coming years will have consequences for decades, determining whether the global economy develops toward greater integration and efficiency or increasing fragmentation and inefficiency. In an era of political polarization and geopolitical tensions, the ability to build bridges through quality, transparency, and local engagement may prove the most important strategic resource for globally operating enterprises.
The article presents the stance of the author and does not necessarily reflect the stance of IFIMES.
