EU confronts €31.9bn monthly China trade gap

The EU's monthly goods deficit with China hit €31.9bn in April (Eurostat). At this week's Brussels summit, EU leaders asked the Commission to sharpen Europe's trade-defense tools. But behind that mandate sits an impossible balancing act: the 27 member states need China in fundamentally different ways, and no single instrument can protect French factories, German car exports, Hungarian battery plants and Spanish pork farmers at the same time.

A mandate, not a decision

Swedish Prime Minister Ulf Kristersson set the tone at the 18 June summit, arguing that Europe can no longer be "naive" about China's economic model of state support and industrial overcapacity (factories producing far more than demand can absorb). He also insisted Sweden remains committed to free trade (GP). The formal agenda called it "global macroeconomic imbalances." In practice it meant one question: what tools should Brussels use against China's widening trade surplus with Europe (Europaportalen)?

The summit produced a mandate, delaying any actual decision. Leaders asked Commission President Ursula von der Leyen to develop or strengthen trade-defense and industrial-policy instruments while keeping dialogue open (Euronews). No tariff was announced. No regulation was activated. Bloomberg framed it as an attempt to respond without launching a new trade war (Bloomberg).

Different tools for different fights

The EU already has trade weapons, but each one requires different evidence. Anti-dumping duties hit imports sold below a fair price. Anti-subsidy duties target goods backed by foreign state support. The Anti-Coercion Instrument handles cases where a third country uses trade pressure to force the EU to change policy (ec.europa.eu). Proving dumping means showing prices below a fair benchmark. Proving coercion means showing Beijing deliberately linked economic pain to a political demand. Lumping everything under "China pressure" collapses legally distinct problems into political shorthand.

Who needs China, and how

Germany is the central contradiction. Berlin wants protection from subsidized Chinese imports but fears retaliation against its own exports. Mercedes-Benz sold 683,600 cars in China in 2024, making it the company's largest market (NADA/Bloomberg). Around 20% of German imports from China come from German companies producing there (Handelsblatt). A trade fight with China is, partly, a fight with Germany's own supply chain.

Spain sits on the other side. China has become Spain's top supplier of goods, with annualised imports of €50.7bn, while Spanish exports to China account for just 2% of the total (El Nacional). Sánchez is pushing for pragmatism, partly because Spanish agri-food exports sit squarely in Beijing's retaliation crosshairs (El País).

In Hungary, China is already the foundation of the industrial strategy. Budapest was Europe's leading destination for Chinese foreign direct investment (money flowing from Chinese firms into local operations) in 2025, overwhelmingly tied to the electric-vehicle battery chain. CATL's plant in Debrecen already employs 1,470 people and targets 2,300 by year-end (Portfolio).

Slovakia shows what happens when a small, specialized economy sits in the blast radius. Autos make up 23.7% of manufacturing value added (BNP Paribas Economic Research). If EU countervailing duties on Chinese EVs trigger Beijing to squeeze European carmakers or their component suppliers, that concentration turns from competitive advantage to vulnerability overnight.

What's still missing

Countervailing duties on Chinese electric vehicles are already in place: 17% for BYD, 18.8% for Geely, 35.3% for SAIC, on top of the standard 10% car tariff (Hinrich Foundation). But Europe still lacks a sector-by-sector map showing which jobs, regions and consumers bear the cost under each possible instrument. Without that, "a common EU response" can mean deterrence against coercion, defense against subsidized overcapacity, or political cover for national industrial interests. The summit chose to keep all three meanings alive. The Commission's next move will show which one wins.