With an October deadline unlikely to yield major concessions from Beijing given structural and leverage imbalances, EU-China trade tensions look set to keep escalating.
Brussels and Beijing are heading toward a trade confrontation in the coming months, but the concessions Europe can actually extract from China will depend on several factors – chief among them how much economic pain the EU is willing to endure.
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The EU-China trade deficit has grown exponentially in recent years, reaching a record €1 billion a day in 2025, prompting European leaders to demand a rebalancing of what they call "unsustainable" economic relations with Beijing.
Tensions have escalated in recent months as the EU makes moves to protect its market, targeting Chinese companies over illegal products, public subsidies and foreign direct investment – and drawing threats of retaliation from Beijing in the process.
European Commissioner for Trade Maroš Šefčovič met his Chinese counterpart, Wang Wentao, in Brussels on 29 June in an effort to defuse tensions. The two sides issued a joint statement calling for "stabilising" the relationship and making it "more balanced."
After the meeting, Šefčovič set an October deadline for "tangible" results through further dialogue, and EU leaders are due to gather in Brussels that same month to discuss macroeconomic imbalances.
But the EU's chances of meaningfully narrowing its trade gap with China remain slim unless Brussels dramatically strengthens its stance – and the fact remains that any decoupling from the Asian giant will take time and cost money.
Structural factors
Officials and experts agree that rebalancing the EU's deep, multi-layered economic ties with China would be an extremely complex process, and would face fierce resistance as the imbalance is rooted in structural factors on both sides.
China's economy remains fundamentally export-driven and heavily subsidised, meaning any concessions Beijing offers are more likely to affect market access for European firms in China than to curb Chinese exports to Europe.
"China's economic adjustments internally are unlikely to happen," Tobias Gehrke, an expert at the European Council on Foreign Relations (ECFR), told Euronews. "Beijing is stuck in a system that needs to gain export market shares. Many of its companies need to export, or they will face bankruptcies or consolidations inside."
A genuine recalibration would require China to boost domestic demand, which is currently squeezed by the fallout from a real estate crash and the absence of a Western-style welfare system, including public pensions.
But such reforms carry political risk, and it's far from clear that stimulating Western-style consumption is compatible with the Communist Party's grip on power. For these reasons, China is unlikely to offer more than minor concessions unless forced to. And Beijing knows time is on its side.
Timing advantage
The EU's trade deficit with China roughly doubled in five years, from €182 billion in 2020 to €360 billion in 2025. No member state has run a trade surplus with China in years – not even Germany, the bloc's largest exporter.
Meanwhile, entire sectors of the European economy risk being wiped out by state-subsidised Chinese imports, in what experts have dubbed the "China 2.0 shock".
Despite promises of "deeper engagement" after the EU-China summit in Beijing in July 2025, neither the EU nor its international partners have secured major concessions from China over the past year.
Discussions of "global economic imbalances" – a euphemism for the China problem – have reached the agenda of the G7, whose members held a video call with Chinese officials ahead of their June summit this year. No breakthrough emerged, though France's G7 presidency said discussions with Beijing would continue.
At the last EU summit, leaders gave the European Commission a mandate to develop a diversification instrument aimed at reducing European businesses' reliance on foreign suppliers for critical goods, but the initiative will take years to develop, negotiate, and implement.
Meanwhile, Brussels' product-specific anti-dumping investigations are routinely circumvented, as Chinese exporters quickly launch new products to sidestep them, and the Commission is reportedly running out of capacity to keep pace.
Still, EU officials insist economic rebalancing remains possible.
Europe's market leverage
As the US tightened access to its market through tariffs, export controls and trade defence tools, China was forced to redirect exports elsewhere, mostly to south-east Asia and Europe.
The EU offers Beijing a crucial relief valve for its industrial overcapacity, and a far more lucrative market than anywhere else in the Global South. That, officials argue, makes rebalancing a shared interest.
"The Chinese want the market to remain open," Alicia García-Herrero, a senior fellow at the economic think tank Bruegel, told Euronews.
For García-Herrero, the most realistic outcome would be an agreement on large import quotas — though she is sceptical such a system could hold over the medium term.
"Even large quotas would need to be quickly increased because there is a European demand for Chinese products. Such a system would be very hard to manage, and China will eventually win in terms of market access."
China's rare earth dominance
One of Beijing's most significant sources of leverage in the talks is Europe's dependence on Chinese rare earths.
The October deadline is no coincidence: it marks the end of a one-year truce between China and the US that allowed the former to continue its rare earth exports globally, including to the EU.
China had restricted them during the full-blown US trade war of 2025, but a deal to lift the restrictions was reached last autumn. It is so far unclear whether the truce will continue past this October, and European industries that critically depend on rare earth supplies are calling for clarity as a matter of urgency.
But in retaliation for the EU's recent 21st sanctions package against Russia, which added 14 Chinese and Hong Kong-based companies to the bloc's sanctions list for supporting Russia's war effort, Beijing barred 14 European companies from receiving further shipments of dual-use goods – a move that could restrict their access to critical minerals.
Given this context, observers are doubtful a significant deal can be struck within the current timeline.
"China can use and probably will use export controls in response to the EU's trade and industrial policy measures," Gehrke said. "If the Europeans adopt safeguards [tariffs and quotas] on chemicals or machine tools, for instance, China would respond by escalating and using more export control restrictions on critical minerals."
At the sidelines of the last European Council meeting in June, Dutch Prime Minister Rob Jetten said Europe should not be "naive" and should expect that any move against China will trigger retaliation.
Any retaliation, in turn, is bound to test the EU's resolve.
Political signalling
China also knows how to exploit divisions within the EU. According to García-Herrero, Europeans are unlikely to secure greater access to the Chinese market because individual EU member states will keep defending their own industries first.
That includes Germany – despite Berlin adopting a tougher stance after worrying trade deficit figures emerged last autumn – and Spain, currently one of the top destinations for Chinese investment in Europe.
In the last legislative term, the EU built a powerful anti-coercion instrument to deter economic blackmail by third countries, dubbed the "trade bazooka". Yet its use has not even been seriously considered.
Brussels is wary that China's willingness to negotiate and make concessions hinges entirely on Europe's projected strength, and how much economic pain the bloc is prepared to absorb in a trade war.
The 21st sanctions package against Russia, which Greece, France, Italy, Germany and Portugal all pushed to water down to protect their own national interests, sends a worryingly weak signal about Europe's resolve.
"We will harvest what we have seeded," a senior EU official told Euronews, speaking on condition of anonymity given the sensitivity of the topic. "A lot will depend on how the Chinese will perceive us."