China’s Trade Imbalance With the EU Hits New High as Imports Fall

EBM NEWSDESK ANALYSIS-Katie Winearls

The deficit is back above $30 billion a month. European exports are falling. Brussels is running out of patience — and options.

China’s imports from the European Union fell 1.3% in May, the first monthly decline in three months. The drop came despite a broad surge in Chinese goods purchases globally — making Europe’s exclusion from that recovery pointed rather than incidental. Exports from China to the EU grew 7.6% in the same period, the weakest rate since October, but still fast enough to push the monthly trade surplus above $30 billion for the second consecutive month. The gap between what Europe sells to China and what China sells to Europe is widening again. Brussels has noticed.

The Numbers

The headline figure is stark. The EU trade deficit in goods with China stood at €98 billion in Q1 2026 — the highest since Q3 2022, when it reached €107 billion. That single-quarter figure reflects a structural deterioration that has been building for two years. The deficit worsened from €65 billion in Q1 2024 to €98 billion in Q1 2026, driven primarily by falling EU exports rather than a surge in Chinese imports.

Zoom out and the picture becomes starker still. EU exports to China amounted to €199.5 billion in 2025, against EU imports from China of €559.5 billion — a year-on-year decrease of 6.5% in exports and an increase of 6.4% in imports. Europe is selling less to China every year. China is selling more to Europe every year. The arithmetic of that trade relationship compounds in one direction only.

The product breakdown tells its own story. EU imports of manufactured goods from China accounted for 97.3% of total imports, with machinery and vehicles making up 54.4% of that total. Electric vehicles, industrial equipment, consumer electronics. These are not commodity imports. They are finished goods competing directly with European manufacturing output — and winning.

Why European Exports Are Falling

The structural explanation is not complicated. China is buying less from Europe because it is making more of what it previously imported. China’s drive toward import substitution and self-sufficiency, combined with a lack of a level playing field for European businesses operating in the Chinese market, has made it progressively harder for EU companies to compete domestically.

German carmakers feel this most directly. BMW, Mercedes and Volkswagen built their profit models around premium vehicle sales in China. Each of those brands is now competing against BYD, NIO and a generation of domestic Chinese manufacturers who have closed the quality gap, undercut on price and benefited from state support that no European competitor can match. China’s EV market share for domestic brands has crossed 65%. European market share inside China has contracted sharply.

The pharmaceutical, luxury and aerospace categories have been more resilient — but they are insufficient to offset the collapse in automotive and industrial machinery exports. In volume terms, the EU-China trade deficit increased from 44.8 million tonnes in 2024 to 58.1 million tonnes in 2025. Over the decade from 2015 to 2025, the deficit increased more than fivefold in volume. Volume growth of that magnitude reflects genuine industrial displacement, not currency fluctuation.

Brussels Reaches for Its Tools

The European Commission has not been passive. Anti-subsidy tariffs on Chinese electric vehicles — imposed in 2024 at rates up to 35% — were the most visible intervention. They have not materially reversed the import trend. Chinese EV manufacturers have responded by announcing European manufacturing facilities, by routing exports through third countries and by accelerating their push into markets where EU tariffs do not apply.

Brussels has also raised concerns about China’s export controls on critical raw materials and technologies, which it says lack clear dual-use justifications and are negatively impacting EU supply chains. The rare earth restrictions China introduced in 2025 — limiting exports of minerals essential to EV battery production, defence electronics and renewable energy infrastructure — represent a direct vulnerability for European industry that tariffs cannot address.

The Commission has simultaneously pushed forward its Foreign Subsidies Regulation, using it to block or investigate Chinese-backed bids in European infrastructure and technology sectors. The tools exist. The question is whether they are proportionate to the scale of the imbalance they are trying to correct.

The Deeper Problem

The EU-China trade relationship has a fundamental asymmetry that pre-dates the current political tensions and will outlast them. Between 2014 and 2024, EU imports from China increased by 101.9%, while EU exports to China grew by just 47%. Europe’s export growth to China has run at less than half the rate of Chinese export growth into Europe across an entire decade.

That gap reflects something more durable than policy. It reflects the divergence between an economy — China — that has spent thirty years building export-oriented manufacturing capacity at scale, and a collection of economies — Europe — that has spent the same period gradually hollowing out industrial production in favour of services, finance and consumption. The trade deficit is not primarily a function of unfair competition, though unfair competition exists. It is a function of structural choices made across multiple European governments across multiple decades.

Tariffs can alter the price of individual goods. They cannot rebuild an industrial base. That is the conversation Brussels has not yet found the political language to have.

PULL QUOTE: “EU exports to China fell 6.5% in 2025. Imports from China rose 6.4%. The monthly deficit is back above $30 billion. The arithmetic runs in one direction only.”

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