Over €1 billion in trade deficit per day: that is the scale of the imbalances recorded between the European Union and China last year.
Meeting in Brussels for a European Council, on 18 and 19 June, EU Heads of State or Government will devote their working dinner on Thursday to ‘global macroeconomic imbalances’. Despite this fairly broad wording, the debate will focus almost exclusively on China, as European leaders now seem to agree on the existence of economic imbalances with Beijing.
In 2025, for the first time, all EU Member States recorded a trade deficit with China. “Last year, the European Union recorded its largest-ever trade deficit, amounting to €360 billion. This situation is of course not sustainable”, the European Commission President, Ursula von der Leyen, said on Monday at a G7 meeting in Évian-les-Bains.
While the principle of de-risking and rebalancing the relationship is expected command broad consensus among the leaders, the use of trade defence instruments and the possible creation of new tools - in particular dedicated to overcapacity - remain unresolved.
A unanimous conclusion. A few years earlier, Member States approached the economic relationship with China from different perspectives, with some prioritising access to the Chinese market and others already warning of the risks linked to strategic dependencies.
On Thursday, the leaders are expected to offer a more convergent reading of the situation, even if some nuances remain.
China remains an essential economic partner for the EU, particularly for supplies of critical raw materials and in several industrial value chains, such as electric vehicles. For Europeans, therefore, there is no question of jeopardising their trade relations with the world’s second-largest economy. All the more so as China recently threatened the EU with ‘countermeasures’, in response to the ‘Made in Europe’ provisions in the future Industrial Accelerator Act (see EUROPE 13857/16).
China nevertheless remains dependent on the EU for its exports. In an analysis published on Tuesday, the Mercator Institute for China Studies (MERICS) stressed that Beijing continues to provide massive support to its industry and is struggling to sufficiently stimulate domestic demand. This combination is fuelling export-led growth and contributing directly to the imbalances observed with its trading partners, particularly the European Union, the Institute stated.
At the European Council, the EU27 is therefore expected to both agree on the need to rebalance trade relations and work on new channels of communication with China. It is in this spirit that a G7 leaders’ statement on geopolitical issues, published on Wednesday, welcomed the summit organised last Thursday (see EUROPE 13886/18) and affirmed their determination to converge “on the causes of global imbalances [...] and the need to address them”.
Existing instruments. Once this diagnosis has been established, the question remains as to which approach the Europeans will adopt. The European Council conclusions are not expected to settle this issue for the time being. The EU27 are expected to consider a new instrument dedicated to overcapacity, and how cooperation with industry can be strengthened.
The idea of an ‘anti-dependency’ instrument is reportedly being prepared, but no concrete proposal has emerged. According to our information, Member States prefer to first assess the effectiveness of the existing tools before discussing new ones.
On Thursday, the leaders are expected to review the options available to them and how to activate them while maintaining dialogue with Beijing. They will also discuss ways to improve the effectiveness and speed of anti-dumping procedures.
Diversification and competitiveness. Several capitals believe that the European response cannot be limited to defensive instruments. Reducing the risks linked to China also means strengthening European economic resilience. The Heads of State or Government are therefore expected to reaffirm their support for diversifying trade partnerships, notably through the conclusion and implementation of free-trade agreements.
The issue of European competitiveness will also feature prominently in the discussions. Strengthening the single market, reducing regulatory obstacles and accelerating investment will be addressed in the context of the ‘One Europe, One Market’ ‘roadmap’, presented last February in Alden Biesen (see EUROPE 13807/1).
The guidelines agreed at the end of the week are then expected to feed into the discussions between the European Commissioner for Trade, Maroš Šefčovič, and his Chinese counterparts, scheduled for late June.
See the draft European Council conclusions dated 16 June: https://aeur.eu/f/mdt (Original version in French by Juliette Verdes, with the editorial staff)