cross-posted from: https://mander.xyz/post/43508565
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The scale of the imbalances with the European Union was thrown into stark relief days ago when Beijing disclosed its trade surplus with the bloc had widened to a record approaching $300 billion in 2025. The value of China’s exports to the EU is now more than double its imports, as Chinese sellers divert goods facing levies in the US.
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“The China shock in Europe is really starting to hit,” said Andrew Small, director of the Asia program at the European Council on Foreign Relations. “What you’ve now had in recent months has been much greater levels of urgency, not all of it playing out in public, but serious crisis meetings taking place.”
The result could be the biggest rethink of EU policy toward Beijing in at least a decade, according to Small, who previously advised von der Leyen on China. Sidetracked for years by the war in Ukraine and, more recently, by Donald Trump’s tariffs, the EU is finally focusing on China, preparing what Small describes as a “pent-up” mix of measures.
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The bloc unveiled a plan earlier this month to ensure its industries aren’t overtaken by global rivals, as competition intensifies with the US and China. The European Commission, the EU’s executive arm, has also proposed setting up an economic security hub to better navigate trade tensions and counter the threat of cheap products flooding the bloc’s single market.
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Time is short for Europe. Economists at Goldman Sachs Group Inc estimate competition from Chinese exports will cut gains in German, Spanish and Italian gross domestic product by 0.2 percentage point or more from next year through 2029.
The fallout from China’s exports might extend to almost a third of euro-area employment, according to economists at the European Central Bank, meaning it could possibly affect more than 50 million jobs.
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“External hostility toward goods exported by China will escalate, particularly in Europe,” said Stephen Jen, chief executive of London-based hedge fund Eurizon SLJ Capital. “This configuration of explosive trade and a cheap renminbi cannot be sustained.”
For China, there is little alternative. The EU’s $20 trillion economy is among the few markets big enough to absorb the goods it used to ship to the US.
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Propelling its exports is a currency undervalued in the view of many economists, making exports cheaper and imports more expensive. The yuan hit a decade low against the euro earlier this year.
“One of the real reasons that Chinese exports are going so fast is that the renminbi is very significantly undervalued relative to the euro,” said EU Chamber of Commerce in China President Jens Eskelund, using an alternative name for the currency. This acts as a “subsidy” for exports and suppresses Chinese consumers’ purchasing power, he said.
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China is now taking 7% of EU exports but supplying almost a quarter of all imports from outside the bloc. China’s deficit with the EU and the UK now accounts for nearly a third of its total trade differential with the world, which exceeded $1 trillion for the first time.
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In 2019, China ran a $25 billion deficit with Europe’s biggest economy. In the first 11 months of this year, that’s flipped to a $23 billion surplus due to the collapse in imports.
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As pressure builds to mount a response, countries could “not only use existing trade tools, like anti-dumping duties, but also develop new tools and approaches for addressing what is turning into a serious and unsustainable situation,” said Wendy Cutler, a former senior US trade negotiator now at the Asia Society Policy Institute.
“We could see the EU and others take further measures to limit Chinese imports during the coming year,” she said.