<div>As the United States and China intensify their economic rivalry, Europe finds itself increasingly caught in the middle&mdash;vulnerable to becoming a dumping ground for Chinese goods shut out of the American market. Despite the European Union&rsquo;s (EU) efforts to balance relations with both superpowers, China&rsquo;s rapidly growing trade surplus with the EU is triggering alarm across the continent and exposing cracks in Europe&rsquo;s open-market model.</div>
<div>As the United States and China escalate their economic rivalry and with no long-term certain solution in sight, Europe finds itself caught in the crossfire, increasingly vulnerable to becoming a fallback market for Chinese goods squeezed out of the US economy. Despite the European Union&rsquo;s (EU) efforts to maintain balanced relations with both economic giants, China&rsquo;s growing trade surplus with the EU is raising alarm across the continent.</div>
<div>In the first four months of 2025 alone, China&rsquo;s trade surplus with the EU surged to a record $90 billion, underlining the shift in global trade patterns as the US imposed reciprocal tariffs on dozens of countries. With American levies on Chinese goods still up to 30 percentage points higher than they were at the start of this year, much of China&rsquo;s excess production is being increasingly redirected toward Europe&mdash;some through Southeast Asia and Latin America.</div>
<div>According to a report by Bloomberg, Maxime Darmet, senior economist at Allianz Trade, said, &ldquo;European and non-US markets are going to see an increase in Chinese shipments.&rdquo;</div>
<div>&ldquo;China will want to keep global market share at a high level, so will try to increase share in other markets,&rdquo; Darmet added.</div>
<h2><span>The new trade battlefield</span></h2>
<div>The shifting trade tides are testing the EU&rsquo;s core principles of economic openness. As Washington embraced a more protectionist stance, Brussels had to recalibrate its trade strategy. The EU has responded with targeted measures&mdash;such as tariffs on Chinese electric vehicles (EVs)&mdash;but has so far resisted a full-scale trade war.</div>
<div>At the heart of the trade imbalance lies China&rsquo;s aggressive industrial policy. State subsidies, particularly in the electric vehicle sector, have helped Chinese companies like BYD undercut competitors around the world. In 2024, BYD sold 4.27 million new vehicles globally, a 41 per cent jump from the previous year. Of those, 1.76 million were fully electric, putting BYD just behind Tesla in global EV sales. China&rsquo;s plug-in hybrid sales also soared 72.83 per cent to 2.49 million units.</div>
<div>The European Commission&rsquo;s move to impose duties on these heavily subsidised imports in late 2024 sparked outrage in Beijing. In retaliation, China launched an anti-dumping investigation into European dairy products, including cheese and milk&mdash;an echo of past tit-for-tat trade tensions and a sign that hostilities are broadening beyond vehicles and technology.</div>
<div>Despite these disputes, China remains the EU&rsquo;s largest trading partner, and the EU is China's second-largest. More than half of EU imports from China consist of mechanical appliances and electrical equipment, while vehicles and aircraft account for less than 6 per cent. On the export side, mechanical appliances and electrical equipment also lead, followed by vehicles and pharmaceuticals.</div>
<h2><span>Germany and France at the forefront of the storm</span></h2>
<div>Germany has been particularly impacted by the changing trade dynamics. The bilateral trade relationship with China, once marked by a German surplus, has flipped dramatically. In 2020, China had a trade deficit of over $18 billion with Germany. By 2024, that had reversed to a $12 billion surplus, and if current trends hold, China&rsquo;s surplus with Germany could exceed $25 billion in 2025.</div>
<div>One major factor has been the rapid rise in Chinese car exports, including both EVs and conventional models, while German exports to China, especially cars, have declined. Despite EU tariffs curbing EV imports, Chinese automakers have ramped up deliveries of hybrids and combustion-engine vehicles, maintaining their momentum in the European market.</div>
<div>France, too, is in the spotlight as it prepares for high-level talks with Chinese Vice Premier He Lifeng. The meeting comes after a temporary 90-day truce between Washington and Beijing, which lowered some tariffs but left many trade barriers firmly in place. European markets welcomed the pause, but economists remain wary, warning that the underlying tensions are far from resolved.</div>
<div>Meanwhile, the EU&rsquo;s trade chief Maros Sefcovic acknowledged the growing concerns last week, stating that the bloc is &ldquo;monitoring possible risks of trade diversion&rdquo;. Initial assessments are expected in mid-May, with the topic likely to dominate the agenda at Thursday&rsquo;s meeting of EU trade ministers in Brussels.</div>
<h2><span>Currency and competitiveness</span></h2>
<div>Further complicating matters is the recent weakening of the Chinese yuan, which in April 2025 hit its lowest level against the euro in more than a decade. This currency slump makes Chinese exports even more attractive to European buyers, increasing competitive pressure on domestic producers already battling deflation and sluggish demand.</div>
<div>As imports from China swell, EU exports to China are faltering. Between January 2023 and December 2024, EU exports to China dropped 12.5 per cent, while imports from China decreased by just 4.9 per cent. This decline in European exports contrasts sharply with a 3 per cent increase in exports to other non-EU countries during the same period.</div>
<div>Monthly trade data reinforces the trend: EU exports to China fell from &euro;19.2 billion ($21.5 billion) in January 2023 to &euro;16.8 billion ($18.8 billion) in December 2024, with the trade deficit peaking at &euro;29 billion ($32.5 million) in August 2024. Though imports from China also declined slightly, the overall deficit remains steep, underscoring Europe&rsquo;s dependence on Chinese goods amid weakening demand for European products in China.</div>
<h2><span>More protectionism likely?</span></h2>
<div>The evolving trade conflict has already altered the strategy of European capitals. Policymakers are increasingly under pressure to safeguard their industries&mdash;not only from Chinese competition but also from the collateral damage of US policies aimed squarely at Beijing.</div>
<div>With the global trade system becoming more fragmented, economists predict that Europe will continue to introduce more non-tariff barriers and subsidies for critical industries. The European Commission is expected to intensify efforts to prevent unfair competition, especially in sectors like automotive, green technology, and advanced manufacturing.</div>
<div>Whether Europe can maintain its identity as a bastion of free trade while protecting its industrial base in this era of geopolitical rivalry remains one of the defining challenges of the post-pandemic global economy.</div>

Business & Economy: In the first four months of 2025, China’s trade surplus with the EU surged to a record $90 billion, underlining the shift in global trade patterns

As the United States and China intensify their economic rivalry, Europe finds itself increasingly caught in the middle—vulnerable to becoming a dumping ground for Chinese goods shut out of the American market. Despite the European Union’s (EU) efforts to balance relations with both superpowers, China’s rapidly growing trade surplus with the EU is triggering alarm across the continent and exposing cracks in Europe’s open-market model. As the United States and China escalate their economic rivalry and with no long-term certain solution in sight, Europe finds itself caught in the crossfire, increasingly vulnerable to becoming a fallback market for Chinese goods squeezed out of the US economy. Despite the European Union’s (EU) efforts to maintain balanced relations with both economic giants, China’s growing trade surplus with the EU is raising alarm across the continent. In the first four months of 2025 alone, China’s trade surplus with the EU surged to a record $90 billion, underlining the shift in global trade patterns as the US imposed reciprocal tariffs on dozens of countries. With American levies on Chinese goods still up to 30 percentage points higher than they were at the start of this year, much of China’s excess production is being increasingly redirected toward Europe—some through Southeast Asia and Latin America. According to a report by Bloomberg, Maxime Darmet, senior economist at Allianz Trade, said, “European and non-US markets are going to see an increase in Chinese shipments.” “China will want to keep global market share at a high level, so will try to increase share in other markets,” Darmet added. The new trade battlefield The shifting trade tides are testing the EU’s core principles of economic openness. As Washington embraced a more protectionist stance, Brussels had to recalibrate its trade strategy. The EU has responded with targeted measures—such as tariffs on Chinese electric vehicles (EVs)—but has so far resisted a full-scale trade war. At the heart of the trade imbalance lies China’s aggressive industrial policy. State subsidies, particularly in the electric vehicle sector, have helped Chinese companies like BYD undercut competitors around the world. In 2024, BYD sold 4.27 million new vehicles globally, a 41 per cent jump from the previous year. Of those, 1.76 million were fully electric, putting BYD just behind Tesla in global EV sales. China’s plug-in hybrid sales also soared 72.83 per cent to 2.49 million units. The European Commission’s move to impose duties on these heavily subsidised imports in late 2024 sparked outrage in Beijing. In retaliation, China launched an anti-dumping investigation into European dairy products, including cheese and milk—an echo of past tit-for-tat trade tensions and a sign that hostilities are broadening beyond vehicles and technology. Despite these disputes, China remains the EU’s largest trading partner, and the EU is China's second-largest. More than half of EU imports from China consist of mechanical appliances and electrical equipment, while vehicles and aircraft account for less than 6 per cent. On the export side, mechanical appliances and electrical equipment also lead, followed by vehicles and pharmaceuticals. Germany and France at the forefront of the storm Germany has been particularly impacted by the changing trade dynamics. The bilateral trade relationship with China, once marked by a German surplus, has flipped dramatically. In 2020, China had a trade deficit of over $18 billion with Germany. By 2024, that had reversed to a $12 billion surplus, and if current trends hold, China’s surplus with Germany could exceed $25 billion in 2025. One major factor has been the rapid rise in Chinese car exports, including both EVs and conventional models, while German exports to China, especially cars, have declined. Despite EU tariffs curbing EV imports, Chinese automakers have ramped up deliveries of hybrids and combustion-engine vehicles, maintaining their momentum in the European market. France, too, is in the spotlight as it prepares for high-level talks with Chinese Vice Premier He Lifeng. The meeting comes after a temporary 90-day truce between Washington and Beijing, which lowered some tariffs but left many trade barriers firmly in place. European markets welcomed the pause, but economists remain wary, warning that the underlying tensions are far from resolved. Meanwhile, the EU’s trade chief Maros Sefcovic acknowledged the growing concerns last week, stating that the bloc is “monitoring possible risks of trade diversion”. Initial assessments are expected in mid-May, with the topic likely to dominate the agenda at Thursday’s meeting of EU trade ministers in Brussels. Currency and competitiveness Further complicating matters is the recent weakening of the Chinese yuan, which in April 2025 hit its lowest level against the euro in more than a decade. This currency slump makes Chinese exports even more attractive to European buyers, increasing competitive pressure on domestic producers already battling deflation and sluggish demand. As imports from China swell, EU exports to China are faltering. Between January 2023 and December 2024, EU exports to China dropped 12.5 per cent, while imports from China decreased by just 4.9 per cent. This decline in European exports contrasts sharply with a 3 per cent increase in exports to other non-EU countries during the same period. Monthly trade data reinforces the trend: EU exports to China fell from €19.2 billion ($21.5 billion) in January 2023 to €16.8 billion ($18.8 billion) in December 2024, with the trade deficit peaking at €29 billion ($32.5 million) in August 2024. Though imports from China also declined slightly, the overall deficit remains steep, underscoring Europe’s dependence on Chinese goods amid weakening demand for European products in China. More protectionism likely? The evolving trade conflict has already altered the strategy of European capitals. Policymakers are increasingly under pressure to safeguard their industries—not only from Chinese competition but also from the collateral damage of US policies aimed squarely at Beijing. With the global trade system becoming more fragmented, economists predict that Europe will continue to introduce more non-tariff barriers and subsidies for critical industries. The European Commission is expected to intensify efforts to prevent unfair competition, especially in sectors like automotive, green technology, and advanced manufacturing. Whether Europe can maintain its identity as a bastion of free trade while protecting its industrial base in this era of geopolitical rivalry remains one of the defining challenges of the post-pandemic global economy.

US-China trade rift may turn Europe into a dumping ground for Chinese goods

The European Union is officially going ahead with tariffs on Chinese EV imports. The EU is citing concerns about unfair competition due to Chinese government subsidies. Meanwhile, China is looking to retaliate with similar probes on EU goods. Take a look at this next report for more on this ongoing trade showdown.

EU launches largest trade case against China

<p>China and the European Union are locked in a trade battle over China's EV overcapacity. The European Commission plans to impose import duties on Chinese EVs, ranging from 17 per cent to 38 per cent, on top of its standard 10 per cent tariff for car imports.</p>

<p>As both countries agree on trade talks, let's see the possible outcomes in-store and the potential global implications.</p>

<p><strong>What are provision measures?</strong></p>

<p>Provisional duties can be imposed within nine months of starting the investigation. Definite duties, the deadline for which is November 3, is the time by which the EU has to conclude if the influx of Chinese EVs is hurting the EU's domestic industry.</p>

<p>Many European countries are reliant on China for EV imports. Germany's economy minister, Robert Habeck, has been vocal about conducting concrete negotiations with China. 'What I suggested to my Chinese partners today is that the doors are open for discussions &amp; I hope that this message was heard.' He said in Shanghai after meeting Chinese officials in Beijing.</p>

<p>The EU Commission is set to deliver its final verdict on July 4. China and EV producers have until July 18 to comment on the findings. The commission has reportedly visited more than 100 sites of EV automakers, both in China and Europe.</p>

<p>Definitive duties are expected to be lower than provisional rates. This is possible as some of the arguments are expected to hold ground. The commission must also consider Tesla's request for a separate duty rate.</p>

<p>EV prices are also expecting a jolt from this outcome. Due to China's competitive pricing, the discounted prices are expected to surge as exporters eye a minimum price to counter export curbs.</p>

<p><strong>Who decides?</strong></p>

<p>The European Commission has full powers to impose duties at the provisional stage, although it does consult EU members. This could potentially help China's cause since major EU members are against tariffs on China.</p>

<p>In case of definite duties, it can be blocked if a qualified EU majority, or 15 EU members, oppose the measures. This means the EU must address domestic industry concerns and keep them in sync with their plans. China is the world's largest car market, and many fear potential losses if tariffs are imposed. Many are concerned about China's retaliation. The pork industry is already reeling from the proposed tariffs on EU pork imports.</p>

<p>Concerned companies can challenge the decision at the European Court of Justice. China can also take the European Union to the World Trade Organisation. Either way, it will be a long process, and a compromised outcome is likely to happen.</p>


China and the European Union are locked in a trade battle over China's EV overcapacity. The European Commission plans to impose import duties on Chinese EVs, ranging from 17 per cent to 38 per cent, on top of its standard 10 per cent tariff for car imports.

China and the European Union are locked in a trade battle over China's EV overcapacity. The European Commission plans to impose import duties on Chinese EVs, ranging from 17 per cent to 38 per cent, on top of its standard 10 per cent tariff for car imports. As both countries agree on trade talks, let's see the possible outcomes in-store and the potential global implications. What are provision measures? Provisional duties can be imposed within nine months of starting the investigation. Definite duties, the deadline for which is November 3, is the time by which the EU has to conclude if the influx of Chinese EVs is hurting the EU's domestic industry. Many European countries are reliant on China for EV imports. Germany's economy minister, Robert Habeck, has been vocal about conducting concrete negotiations with China. 'What I suggested to my Chinese partners today is that the doors are open for discussions & I hope that this message was heard.' He said in Shanghai after meeting Chinese officials in Beijing. The EU Commission is set to deliver its final verdict on July 4. China and EV producers have until July 18 to comment on the findings. The commission has reportedly visited more than 100 sites of EV automakers, both in China and Europe. Definitive duties are expected to be lower than provisional rates. This is possible as some of the arguments are expected to hold ground. The commission must also consider Tesla's request for a separate duty rate. EV prices are also expecting a jolt from this outcome. Due to China's competitive pricing, the discounted prices are expected to surge as exporters eye a minimum price to counter export curbs. Who decides? The European Commission has full powers to impose duties at the provisional stage, although it does consult EU members. This could potentially help China's cause since major EU members are against tariffs on China. In case of definite duties, it can be blocked if a qualified EU majority, or 15 EU members, oppose the measures. This means the EU must address domestic industry concerns and keep them in sync with their plans. China is the world's largest car market, and many fear potential losses if tariffs are imposed. Many are concerned about China's retaliation. The pork industry is already reeling from the proposed tariffs on EU pork imports. Concerned companies can challenge the decision at the European Court of Justice. China can also take the European Union to the World Trade Organisation. Either way, it will be a long process, and a compromised outcome is likely to happen.

Explainer: What happens next in the EU-China EV standoff

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EU investigates Chinese EV subsidies

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US-China trade rift may turn Europe into a dumping ground for Chinese goods

EU launches largest trade case against China

Explainer: What happens next in the EU-China EV standoff

EU investigates Chinese EV subsidies