New trade routes challenge EU protections
China's increasing financial engagement in Morocco and Turkey is facilitating new trade paths that bypass European customs rules. These nations act as important entry points to the EU market, allowing Chinese businesses to export at low cost by avoiding EU tariffs. As part of this strategy, Chinese companies are setting up operations in these countries to take advantage of duty-free agreements between the EU and its neighbors.
Both Morocco and Turkey are part of trade agreements with the EU that eliminate or significantly lower import tariffs, making them ideal for Chinese exports. This has raised concerns in Brussels, as officials fear these agreements could reduce the effectiveness of tariffs imposed on products like electric vehicles and solar panels. The EU has long imposed additional duties on Chinese products, but these new routes may make those barriers ineffective.
The European Commission is under pressure to respond swiftly. Trade Commissioner Maroš Šefčovič is striving for a resolution by October, but Chinese companies are already setting up production in these countries, aiming to take advantage of the trade benefits. European policymakers are preparing for a potential surge in low-cost goods from China entering the EU through these gateway countries, which could undermine the bloc's economic security.
Chinese companies are building manufacturing facilities in Morocco, focusing on high-value products such as electric vehicles, batteries, and automotive components. Key players like Gotion, which is establishing a battery production facility, and Sentury Tire, which will manufacture tires, are making strategic moves in the region. These investments are part of a broader strategy to position China as a major manufacturer in countries that can export duty-free into the EU.
In Turkey, BYD, a leading Chinese electric vehicle company, was granted favorable market access in exchange for a proposed factory, though the project is now paused. Haier and Astronergy are also entering the Turkish market, taking advantage of the absence of import tariffs. These moves signal China's intent to leverage these two countries as export platforms to access the European market without facing the same trade barriers.
According to the Rhodium Group, Chinese investments in Morocco have reached $6 billion over four years, with another $2 billion in Turkey. These investments enable Chinese firms to produce goods locally and export them duty-free into the EU. Egyptian investments, also notable at $6 billion for 2025, primarily target the US and Gulf markets, not Europe. However, the growing Chinese presence in Morocco and Turkey is seen as a direct challenge to the EU's trade policies.
EU struggles to close these loopholes
In March, the European Commission introduced the Industrial Accelerator Act, a proposed law designed to prioritize EU-made goods in public contracts and funding. China reacted strongly, with threats of retaliation. The IAA creates a preference for EU-made goods in public procurement and funding, and applies to non-EU countries under certain conditions. This move has been widely criticized by China and its allies.
The bill has drawn resistance from industries that rely on international supply chains, especially in the automotive sector. ACEA, the group representing EU carmakers, is advocating for Morocco to be listed as a trusted partner, reflecting the significant presence of European automakers there. The debate over how to define
Experts warn that Morocco and Turkey are increasingly functioning as manufacturing staging areas for Chinese businesses. The investments made in these countries already represent approximately a quarter of Chinese investments in Europe and the Maghreb region. This strategy allows China to shift production closer to the EU market while benefiting from favorable trade terms.