China’s trade grip tightens in Europe as clock ticks towards October deadline

As Europe approaches a critical deadline to rebalance its trade ties with China, new figures reveal the continent's trade deficits with the mainland remain largely unchanged. In July, China's surplus over 24 of the 27 European Union members widened, with some countries experiencing staggering increases. For example, the surplus with Sweden nearly quadrupled, while Malta's surged by 166.6 percent.

Faced with fears of deindustrialization due to cheap Chinese imports, European officials set a three-month deadline to reverse this trend. However, data shows that despite ongoing negotiations, EU member states continue to be net importers from China. This trade imbalance has sparked concerns about hidden state subsidies and industrial overcapacity in China, leading to a broader geopolitical rivalry.

ECB President Christine Lagarde highlighted the erosion of Europe's mid-tech manufacturing sector, noting that China now competes directly with the euro area in nearly 40% of sectors where Europe once held an advantage. She also pointed out that manufacturing in the EU is suffering partly due to a lack of access to cheap energy.

The European Commission is set to announce new measures to rebalance trade ties with China next month, which will then be discussed by national leaders at a summit in October. Meanwhile, recent EU restrictions on low-value Chinese goods have shown some effectiveness, with exports falling by up to 54% in value terms and 40.8% in volume terms.

However, other areas, such as electric vehicles, have been less responsive to EU measures. Despite anti-subsidy duties imposed in October 2024, EV exports from China to several EU countries have surged. This suggests that while some EU policies can be effective, others may be less so in mitigating the trade deficit.