EU-China trade deficit hits €360 billion

The European Commission declared EU-China trade and investment relations "not sustainable" on May 29, the sharpest language Brussels has directed at Beijing. The statement follows a year in which the EU's trade deficit with China jumped 18% to €359.8 billion (Eurostat, Courthouse News). Exports to China fell while imports rose, and the Commission warns 29 million European jobs face risk from Chinese industrial overcapacity (Le Monde).

But the declaration was a political discussion, not legislation. No binding measures came out of it. And Europe's actual dependence on China has grown since "de-risking" was announced three years ago.

The dependency that deepened

A Friedrich-Naumann Foundation study released the same week put numbers to the failure. Germany's reliance on Chinese imports increased in every critical category between 2023 and 2025: lithium batteries from 49.7% to 66.5%, antibiotics from 65.3% to 72.9%, solar panels from 89% to 92.6% (n-tv). Rare earth import volumes tripled.

The pattern holds continent-wide. Italian imports from China surged 91% between 2019 and 2025, the steepest rise among major EU economies (Corriere della Sera). Across the EU, 98% of solar panel imports come from China and roughly 70% of battery and clean-tech supply chains run through Chinese producers (Bruegel, EU JRC). Europe wants to break free from a supplier it needs more than ever.

France pushes, Germany hedges

Five countries (France, Italy, Spain, the Netherlands, and Lithuania) submitted a joint paper on May 25 demanding faster trade defenses (Corriere della Sera). EU Trade Commissioner Stéphane Séjourné followed with a three-pillar plan: cap any single country's share of a supply chain at 60%, replace slow product-by-product investigations with sector-wide safeguards, and tighten rules on foreign subsidies (Le Monde).

Germany didn't sign. Berlin isn't rejecting trade defense outright, but it wants surgical, WTO-compliant tools rather than blunt supply-chain caps that could trigger Chinese retaliation (Handelsblatt). Economy Minister Katherina Reiche flew to Beijing the same week with a 40-person business delegation seeking "reciprocity" and reliable access to rare earths. She returned with no agreements (Deutschlandfunk).

Germany's caution tracks its exposure. Bilateral trade with China reached €250 billion in 2025, though German auto exports have halved since 2022 (Euronews, Krone). The contradictions are wider than Berlin. Italy signed the hawkish paper while welcoming Chinese carmaker Dongfeng to co-manage a Stellantis factory in Cassino (Il Fatto Quotidiano). Hungary, which absorbed 44% of Chinese FDI entering the EU, faces a direct collision between its factory-floor strategy and proposed supply-chain caps that could undermine the BYD and CATL plants it is building (Portfolio).

Rhetoric outpaces enforcement

Séjourné's three pillars have no legislative text. A proposed "anti-overcapacity instrument," which would let the EU preemptively block imports priced below production cost, remains in consultation, with a formal proposal expected at earliest in Q3 2026 (Atlantic Council). An updated FDI screening regulation (government review of foreign acquisitions in sensitive sectors) reached political agreement in December 2025 but won't apply until late 2027 (Consilium).

The one concrete change arriving soon: from July 1, the €150 duty-free threshold on parcels disappears (European Commission). Currently, millions of micro-shipments from Chinese e-commerce platforms like Temu and Shein enter the EU tax-free, undercutting local retailers. Applying tariffs to every parcel directly hits the margins of that business model.

China is not waiting for Europe to decide. Beijing has already imposed 42.7% tariffs on EU dairy (Euronews), delayed Airbus certifications, restricted rare earth exports, and sanctioned seven European defense companies (Radio Free Europe).

The European Council meets June 18 to set direction. The deeper contradiction is mathematical: Europe needs Chinese solar panels, batteries, and rare earths to meet its own climate targets. Protecting domestic industry slows decarbonization; unchecked imports destroy the industrial base needed for long-term self-sufficiency (CER). Three years into "de-risking," the dependency has only deepened. On June 18, Europe has to decide which hurts more: gutting its own green transition, or watching its industrial base disappear.