Navigating the Trade War: Spain's Diplomatic Tightrope Between China and the U.S

The recent visit of Spanish Prime Minister Pedro Sánchez to Beijing in April 2025 has marked a significant moment in the evolving landscape of global trade relations.

During this high-level diplomatic engagement, Chinese President Xi Jinping made a pointed call for China and the European Union to jointly oppose what he termed "unilateral acts of bullying," a thinly veiled reference to U.S. President Donald Trump's aggressive tariff policies that have sparked a global trade war.

This diplomatic encounter, occurring against the backdrop of escalating tensions between the United States and China, with tariffs reaching unprecedented levels of 145% on Chinese imports and retaliatory measures of 125% on American goods, signals a potential realignment of trade alliances and strategic partnerships across the global economic landscape.

Xi's assertion that "there are no winners in a tariff war" reflects China's strategic narrative positioning itself as a defender of globalization while attempting to forge closer ties with the European Union as a counterbalance to American economic pressure.

This comprehensive analysis explores the multifaceted dimensions of this diplomatic overture, examining its historical context, strategic implications, potential scenarios for future development, and the economic data that underscores the significance of this evolving geopolitical dynamic.

Historical Context and Current Trade Relations

The relationship between China, the European Union, and the United States has undergone significant transformations over the past decades, with the current tensions representing the culmination of long-simmering disagreements about trade practices, market access, and economic governance.

The European Union has officially categorized China as a "cooperation partner, economic competitor, and systemic rival" in its strategy outlined in 2019, reflecting the complex and multifaceted nature of their relationship

This tripartite characterization encapsulates the EU's pragmatic approach to China, acknowledging areas of mutual interest while remaining vigilant about competitive challenges and fundamental differences in governance systems and values.

Spain's relationship with China has been particularly active in recent years, with Pedro Sánchez's April 2025 visit representing his third trip to China in as many years.

This frequent diplomatic engagement underscores Spain's strategic interest in deepening economic ties with the world's second-largest economy, particularly in the context of global economic uncertainties exacerbated by Trump's aggressive trade policies.

Trade between Spain and China has been growing steadily, exceeding €44 billion in 2024, though with a significant imbalance favoring China

Spanish exports to China experienced a modest 4.3% increase last year according to Beijing's data, but the overall trade deficit remains substantial, with Chinese imports to Spain reaching approximately €45 billion while Spanish exports to China amounted to only about €7.4 billion

The economic relationship between Spain and China extends beyond trade to include investments in strategic sectors.

In 2023, China invested €131 million in Spanish projects, while Spanish investments in China totaled €91 million

While these figures are relatively modest, they indicate growing interest from both economies in developing connections in key areas such as technology, energy, and logistics.

During Sánchez's recent visit, the two countries signed agreements on science, technology, education, and the film industry, as well as protocols regarding pork and cherry exports, further diversifying their economic relationship

Against this backdrop, Trump's decision in April 2025 to impose extensive tariffs on all U.S. trading partners has sent shockwaves through the global economy.

The initial announcement on April 2 introduced a minimum 10% tariff on all U.S. imports, with higher rates targeting 57 specific countries

While Trump subsequently declared a 90-day pause on tariffs for over 75 nations seeking trade discussions with the U.S., China was notably excluded from this reprieve

Instead, Trump escalated tensions by increasing tariffs on Chinese imports to 145%, including a 20% charge previously imposed due to Beijing's alleged failure to control fentanyl exports to the U.S.

This aggressive approach has prompted immediate retaliation from China, setting the stage for a potentially devastating trade war between the world's two largest economies.

Xi Jinping's "Anti-Bullying" Rhetoric: Analysis and Implications

Xi Jinping's comments during his meeting with Sánchez represent his first public statements on the trade conflict since Trump launched his tariff offensive.

His characterization of U.S. actions as "unilateral acts of bullying" and his call for China and the EU to "jointly safeguard the trend of economic globalization and the international trade environment" reveals China's strategic messaging in this conflict

By framing the issue as one of defending the principles of globalization against unilateral aggression, Xi is attempting to position China as a responsible stakeholder in the international economic order while casting the United States as a disruptive force.

The Chinese president's assertion that "China has always regarded the EU as an important pole in a multipolar world, and is one of the major countries firmly supporting the EU's unity and growth" highlights Beijing's effort to drive a wedge between Europe and the United States by emphasizing shared interests in maintaining an open global trading system

This rhetoric builds on China's consistent narrative of supporting multipolarity in international relations as a counterbalance to U.S. hegemony, a position that has gained some traction in parts of Europe frustrated with what they perceive as American unilateralism.

Xi's statement that "there are no winners in a tariff war" directly challenges Trump's previous assertions that trade wars are "easy to win.

By emphasizing the mutually destructive nature of trade conflicts, Xi is appealing to rational economic self-interest among European leaders who are concerned about the potential collateral damage of U.S.-China tensions on their own economies. This framing also allows China to present itself as the reasonable party seeking dialogue and cooperation rather than confrontation.

The timing of these comments during Sánchez's visit is particularly significant. By choosing to make his first public statements on the trade conflict to a European leader rather than directly addressing the United States, Xi is signaling the importance China places on cultivating European allies in this dispute.

This approach reflects China's broader strategy of trying to prevent the formation of a united Western front against its economic practices by emphasizing areas of common interest with individual European nations and the EU as a whole.

The Spain-China Connection: Sánchez's Diplomatic Tightrope

Pedro Sánchez's visit to Beijing, amid escalating U.S.-China tensions, places Spain in a delicate diplomatic position.

As the first European leader to officially visit China since the intensification of tariff disputes between the U.S. and various countries worldwide, Sánchez is navigating a complex landscape of competing interests and priorities

His trip aims to forge closer economic and political ties with China amid the global fallout from Trump's tariff policy, seeking to position Spain as an interlocutor between China and the EU and to attract more Chinese investment

This diplomatic initiative has not been without criticism from the United States. Treasury Secretary Scott Bessent warned that forming closer ties with Beijing would be a "fool's errand for Europeans," likening it to "self-sabotage" or "cutting your own throat"

This harsh language reflects Washington's concern about potential fractures in transatlantic unity on China policy, particularly as European nations like Spain seek to diversify their economic relationships in response to U.S. trade unpredictability.

Sánchez has framed Spain's approach to China in terms of pragmatic engagement rather than strategic alignment

. During his visit, he emphasized that Spain favors "a more equitable relationship between the European Union and China, emphasizing dialogue to address differences and collaboration on shared interests"

This balanced rhetoric acknowledges the competitive aspects of EU-China relations while highlighting the potential for mutually beneficial cooperation in specific areas.

The Spanish Prime Minister has also positioned himself as an advocate for dialogue between China and the United States, stating that "trade wars aren't good – the world needs China and the U.S. to talk"

This mediating stance reflects Spain's interest in de-escalation of tensions that could harm global economic growth.

It also aligns with broader European concerns about being caught in the crossfire of a U.S.-China trade war, potentially facing secondary sanctions or other economic pressures from both sides.

Spain's economic interests in China are significant and growing. China ranks as Spain's fourth-largest trading partner and second-largest source of imports, though it is only the twelfth-largest market for Spanish exports

This imbalance is something Sánchez has acknowledged, calling for "more balanced relations" between the EU and China, referring to the EU's trade deficit with Beijing, which exceeded $300 million last year

Despite these challenges, over 14,500 Spanish firms are engaged in trade with China, with Spanish exports mainly consisting of chemicals, minerals, and industrial parts

Economic Impact Analysis of the Tariff War

The escalating tariff conflict between the United States and China poses significant economic risks not only for the direct participants but for the global economy as a whole. According to projections from the Penn Wharton Budget Model (PWBM), Trump's tariffs as implemented in April 2025 would reduce U.S. GDP by approximately 8% and wages by 7% These are staggering figures that suggest the potential for long-term structural damage to the American economy despite claims that tariffs would protect American industries and workers.

The PWBM analysis further indicates that a middle-income household in the United States faces a $58,000 lifetime loss due to these tariff policies

This economic burden is projected to be twice as large as what would result from a revenue-equivalent corporate tax increase from 21% to 36%, which is itself considered a highly distorting tax policy

These estimates suggest that tariffs, while politically popular in some quarters, represent an extremely inefficient form of taxation that imposes disproportionate costs on households across the income spectrum.

From a revenue perspective, President Trump's tariff plan is projected to raise over $5.2 trillion over 10 years on a "strict conventional" basis and $4.2 trillion on a "partially dynamic" basis commonly used with tariffs

While this represents a significant source of government revenue that could theoretically be used to reduce federal debt, the PWBM analysis suggests that the economic costs of collecting this revenue through tariffs far outweigh any potential benefits from debt reduction.

The impact of these tariffs extends beyond direct economic indicators to affect international capital flows.

As the PWBM report notes, larger tariffs would decrease international capital flows, reducing worldwide demand for U.S. Treasuries at a time when the U.S. national debt is increasing faster than GDP

This dynamic could force U.S. households to purchase more bonds, requiring bond prices to fall (yields to increase), domestic capital investment prices to fall, or both.

These financial market effects represent additional channels through which tariffs can damage economic performance beyond their direct impact on trade flows.

For China, the economic implications of this trade conflict are also significant. While China's dependence on the U.S. for trade has diminished over the years, it remains substantial, with China exporting nearly $440 billion in goods to the U.S. in 2024

The imposition of 145% tariffs on Chinese imports to the U.S. threatens to severely disrupt this export channel, potentially leading to factory closures, job losses, and reduced economic growth in China.

This economic pressure may be part of Trump's calculation in targeting China specifically while offering temporary relief to other trading partners.

The European Union, caught between these two economic superpowers, faces its own set of challenges.

EU exports to both the U.S. and China are substantial, and disruptions to global supply chains resulting from the tariff war could have cascading effects throughout European industries.

While EU exports to the U.S. have received a temporary reprieve from new tariffs, the uncertainty surrounding future trade policy creates a difficult environment for long-term business planning and investment decisions.

Scenario Analysis: Potential Trajectories and Outcomes

Scenario 1: Escalation and Decoupling

The most concerning scenario involves continued escalation of tariff measures between the United States and China, potentially expanding to include non-tariff barriers and restrictions in areas such as technology, investment, and financial services.

In this scenario, Trump's administration might view initial economic pain as necessary for long-term strategic realignment and continue to increase pressure on China despite economic costs to U.S. consumers and businesses.

China, determined to demonstrate that it will not be coerced by economic pressure, would likely respond with increasingly severe countermeasures.

Beyond tariffs, these could include restrictions on rare earth exports (critical for many high-tech products), reduced purchases of U.S. agricultural products, and regulatory harassment of U.S. companies operating in China.

Chinese state media's rhetoric about fighting "to the end" suggests a willingness to absorb significant economic pain to maintain national pride and Communist Party legitimacy

Under this scenario, the European Union would face intense pressure to choose sides or at least align more closely with one of the economic superpowers.

Individual member states might adopt different positions based on their economic relationships and security considerations, potentially straining EU unity.

Spain and other countries with growing economic ties to China would face particularly difficult choices between maintaining access to the Chinese market and preserving their traditional alliance with the United States.

The economic consequences of this scenario would be severe. The PWBM's projected 8% reduction in U.S. GDP could prove conservative if the conflict expands beyond tariffs to a more comprehensive economic decoupling.

Global supply chains would undergo painful and costly restructuring, with production shifting to avoid tariff barriers. Investment uncertainty would likely depress capital formation across major economies, further reducing growth potential.

Scenario 2: EU-China Alignment Against U.S. Trade Policy

A second scenario involves the European Union moving closer to China's position on global trade governance in response to what it perceives as destabilizing U.S. unilateralism.

Xi Jinping's appeal to Sánchez about jointly opposing "unilateral acts of bullying" represents an invitation to this kind of alignment

In this scenario, the EU would not abandon its relationship with the United States but would coordinate more closely with China on WTO reform, climate policy, and other areas of global economic governance.

This alignment would likely be selective rather than comprehensive, given the EU's continuing concerns about Chinese market access, intellectual property protection, and state subsidies.

The EU's characterization of China as simultaneously a "cooperation partner, economic competitor, and systemic rival" would continue to shape policy, but with greater emphasis on the partnership dimension in response to U.S. trade aggression

For China, this scenario represents a strategic victory, helping to prevent international isolation and providing alternative markets and investment opportunities as U.S. access becomes more restricted.

Xi's emphasis on China having "always regarded the EU as an important pole in a multipolar world" reflects this strategic interest in cultivating Europe as a counterbalance to U.S. pressure.

The economic implications of this scenario would include increased EU-China trade and investment flows, potentially accelerating current trends

. Spanish exports to China, which grew by 4.3% last year, might see faster expansion under more favorable trading conditions.

However, the EU would continue to press for greater market reciprocity to address the persistent trade deficit with China, which exceeded $300 million last year

Scenario 3: Negotiated De-escalation

A third scenario involves a negotiated de-escalation of trade tensions, potentially facilitated by European mediation.

Sánchez's statement that "trade wars aren't good – the world needs China and the U.S. to talk" reflects a European interest in promoting dialogue between the two economic giants. In this scenario, the 90-day pause on tariffs for most countries could extend to China as part of a broader agreement to address specific trade concerns through negotiation rather than unilateral action.

For this scenario to materialize, both the United States and China would need to find face-saving compromises that allow them to claim victory for domestic audiences while stepping back from the brink of a full-scale trade war.

China might agree to increased purchases of U.S. goods and limited reforms to intellectual property protection and market access policies, while the U.S. might agree to reduce tariff levels and engage in dialogue on industrial policy and subsidy reform.

The EU would play a critical role in this scenario, potentially offering concessions on its own trade policies to facilitate a U.S.-China agreement.

European diplomatic efforts, including visits like Sánchez's trip to Beijing, could create communication channels and identify potential areas of compromise between the increasingly hostile superpowers.

Economically, this scenario would provide relief to global markets and business confidence, potentially averting the worst projections of GDP and wage losses outlined in the PWBM analysis

However, the fundamental tensions in the U.S.-China economic relationship would remain, creating the potential for future conflicts even after a temporary de-escalation.

Scenario 4: Regional Trade Blocs and Partial Decoupling

A fourth scenario involves the emergence of more distinct regional trade blocs, with partial but not complete economic decoupling between China and the United States.

In this scenario, U.S.-China trade would continue but at significantly reduced levels, with critical supply chains restructured to reduce dependencies deemed strategically risky by either side.

The European Union would maintain economic relationships with both powers but might lean toward one or the other in specific sectors based on economic and security considerations.

For example, the EU might align more closely with the U.S. on high-technology and security-related industries while maintaining robust trade with China in consumer goods and other less sensitive sectors.

Spain's positioning as an "interlocutor between China and the EU" could be particularly valuable in this scenario, helping to maintain communication channels across increasingly separate economic spheres.

Spanish companies would need to navigate the complexities of operating across different regulatory and trade environments, potentially specializing in bridging roles between the emerging blocs.

The economic consequences of this scenario would include higher costs for many goods due to reduced efficiency in global supply chains, but potentially less severe GDP impacts than full decoupling.

The PWBM projection of an 8% reduction in U.S. GDP represents the high end of potential outcomes under this more moderate scenario

European Union's Position and Strategic Options

The European Union faces a complex strategic calculation in responding to the escalating U.S.-China trade conflict.

On one hand, the EU shares many of the United States' concerns about Chinese economic practices, including restricted market access, intellectual property violations, forced technology transfers, and industrial subsidies.

On the other hand, European countries have significant economic interests in China and concerns about the disruptive effects of Trump's unilateral tariff policies on the global trading system.

The EU's official characterization of China as a "cooperation partner, economic competitor, and systemic rival" reflects this nuanced position.

Unlike the more confrontational U.S. approach under Trump, the EU has generally favored engagement with China while gradually developing tools to address specific concerns about economic reciprocity and fair competition.

Pedro Sánchez's comments during his visit to Beijing illustrate this balanced approach. He emphasized that Spain "aspire[s] to collaborate on matters of mutual interest, enhancing trade and investment in a manner that benefits the development of our nations from our distinct perspectives".

At the same time, he called for "more balanced relations" to address the persistent trade deficit with China.

The EU faces several strategic options in navigating the current situation:

1. Strategic Autonomy: The EU could pursue a more independent position, developing its own tools to address both Chinese and American economic practices that it considers unfair or damaging to European interests. This approach would involve strengthening the EU's trade defense instruments, investment screening mechanisms, and industrial policies to protect key sectors while maintaining openness to beneficial economic engagement with both powers.

2. Closer Alignment with the United States: Despite concerns about Trump's methods, the EU shares many of the underlying concerns about Chinese economic practices. A transatlantic approach to addressing these issues could provide greater leverage than either the EU or U.S. could achieve alone. However, this option risks exacerbating tensions with China and potentially sacrificing European economic interests in the Chinese market.

3. Selective Cooperation with China: The EU could respond positively to Xi's call for joint opposition to "unilateral acts of bullying" in specific areas like WTO reform and climate policy while maintaining pressure on China regarding market access and level playing field issues. This balanced approach would aim to preserve economic benefits from both relationships while avoiding being forced to choose between the two powers.

4. Mediating Role: As suggested by Sánchez's comment that "the world needs China and the U.S. to talk," the EU could position itself as a mediator seeking to de-escalate tensions between the world's two largest economies. This approach would emphasize the EU's interest in a stable, rules-based international economic order and could potentially enhance European diplomatic influence.

In practice, the EU's response will likely incorporate elements of all these options, varying by sector and issue area.

The diversity of economic relationships and strategic priorities among EU member states creates internal tensions that complicate the development of a fully coherent approach. Countries like Spain, with growing economic ties to China, may push for greater engagement, while others more concerned about security implications or industrial competition may favor a more cautious approach.

Conclusion: The Future of Multilateral Trade and Anti-"Bullying" Coalitions

The call by Xi Jinping for China and the European Union to jointly oppose "unilateral acts of bullying" represents a significant moment in the evolving landscape of global trade politics. As the United States under Trump pursues an aggressive tariff strategy that has particularly targeted China, Beijing is actively seeking to prevent international isolation by cultivating relationships with European powers and positioning itself as a defender of globalization and multilateral trade rules.

The economic stakes in this conflict are enormous. The PWBM projects that Trump's tariffs would reduce U.S.

GDP by about 8% and wages by 7%, with a middle-income household facing a $58,000 lifetime loss.

These projections suggest that the economic costs of an escalating trade war would far exceed any potential benefits for the United States, China, or the global economy as a whole.

Spain's role in this dynamic, as illustrated by Sánchez's visit to Beijing, highlights the difficult choices facing European nations caught between their traditional alliance with the United States and their growing economic interests in China.

With bilateral trade exceeding €44 billion in 2024, China represents an increasingly important economic partner for Spain, though the significant imbalance in this relationship (with imports from China far exceeding exports) creates its own tensions and challenges.

Looking forward, the trajectory of this trade conflict will depend on several key factors:

1. The willingness of the United States to negotiate rather than escalate: The 90-day pause on tariffs for most countries suggests some flexibility in Trump's approach, but the exclusion of China from this pause and the escalation to 145% tariffs on Chinese imports indicates a particularly confrontational stance toward Beijing.

2. China's capacity to absorb economic pain without compromising: Xi's statement that China is "undaunted" and his expression of faith in the country's capability to navigate difficulties suggests a readiness for prolonged economic conflict, though the actual economic and political costs of such a stance may test this resolve over time.

3. The European Union's ability to formulate a coherent strategy: Internal divisions within the EU regarding China policy may limit Europe's ability to play an effective mediating role or to leverage its collective economic weight to influence the behavior of either the United States or China.

4. The resilience of global supply chains: The extent to which businesses can adapt to tariff barriers through supply chain restructuring will influence the ultimate economic impact of the trade war, potentially moderating some of the most severe projections if adaptation proves more feasible than anticipated.

The coming months will be critical in determining whether Xi's anti-"bullying" rhetoric translates into concrete cooperation with European powers or remains primarily a tool of Chinese public diplomacy.

Similarly, the economic data emerging from the initial implementation of Trump's tariffs will provide important indicators of the actual impact on growth, employment, and inflation across affected economies.

What is clear is that the global trading system stands at a crossroads, with the actions of the United States, China, and the European Union collectively determining whether the future involves greater fragmentation into competing economic blocs or a renewed commitment to multilateral cooperation, albeit potentially under revised rules that address legitimate concerns about fair competition and reciprocal market access.

In this context, voices like those of Pedro Sánchez calling for dialogue and cooperation remain essential counterpoints to the rhetoric of confrontation.

As he stated during his visit to Vietnam, "Only through multilateralism and cooperation among nations can we tackle such global challenges".

Whether such appeals for multilateral solutions can prevail in an increasingly fractious global environment remains perhaps the central question facing the international economic order.