Chinese exports put country on collision course with Europe | World

The scale of trade imbalances with the European Union became clear recently when Beijing announced that its surplus with the bloc would reach a record near 300 billion in 2025. Currently, the value of Chinese exports to the EU is more than double that of imports, with Chinese sellers repurposing products subject to U.S. tariffs.

“China’s shock to Europe is really starting to be felt,” said Andrew Small, director of the Asia program at the European Council on Foreign Relations. “What we have seen in recent months is a much higher level of urgency: not everything is made public, but serious crisis meetings are taking place. »

According to Small, who has previously advised von der Leyen on China-related issues, the outcome could represent the biggest overhaul of EU policy toward Beijing in at least a decade. Distracted in recent years by the war in Ukraine and, more recently, by Donald Trump’s tariffs, the EU has finally turned its attention to China and is preparing what Small describes as a “repackaged” package of measures.

The bloc this month unveiled a plan to ensure its industries are not overtaken by global rivals as competition with the United States and China intensifies. The European Commission, the EU’s executive body, has also proposed the creation of an economic security center to better manage trade tensions and combat the threat of a flood of cheap goods in the single market.

The EU should also propose criteria for foreign investments involving technology transfer, use of local content and internal value chains.

The warning sounds as other major economies erect trade barriers: Mexican lawmakers this week approved new tariffs on Asian imports.

Time is against Europe. Economists at Goldman Sachs estimate that competition from Chinese exports will reduce GDP growth in Germany, Spain and Italy by at least 0.2 percentage points per year between 2026 and 2029.

The impact of Chinese exports could hit almost a third of jobs in the euro zone, according to economists at the European Central Bank, meaning more than 50 million workers could be affected.

“Foreign hostility towards products exported by China will increase, particularly in Europe,” said Stephen Jen, CEO of London-based fund Eurizon SLJ Capital. “This combination of explosive trade and a devalued renminbi is not sustainable. »

For China, there are few alternatives. The EU’s economy, valued at 20 trillion euros, is one of the few markets large enough to absorb goods once destined for the United States.

In Brussels, the risks of confrontation became evident this year as trade tensions increased between China and the United States. Beijing then used its dominance in rare earths, disrupting key industries – from electric vehicles to wind turbines – and triggering production shutdowns at European companies.

Although the EU has earmarked at least €3 billion for next year to reduce its dependence on Chinese raw materials, in practice this will take many years to produce significant effects.

It’s not just China’s industrial might that gives it an advantage.

Boosting exports is a currency considered devalued by many economists, making exports cheaper and imports more expensive. The yuan reached its lowest value in a decade against the euro this year, despite a record trade surplus in favor of Beijing.

“One of the real reasons why Chinese exports are growing so quickly is that the renminbi is significantly devalued against the euro,” said Jens Eskelund, president of the EU Chamber of Commerce in China, using another name for the currency. This functions as a “subsidy” to exports and reduces the purchasing power of Chinese consumers, he added.

For every container Europe exports to China, four return the other way, Eskelund said, emphasizing that this imbalance is not only growing, but accelerating.

China’s trade surplus with Europe soared during the pandemic, as consumers began buying more products to adapt to lockdowns and remote working.

At the same time, Chinese companies have moved up the value chain and begun to compete more directly with foreign companies in high-tech sectors such as medical devices and luxury cars. While Chinese imports stagnated, the recovery of exports made trade relations even more unequal.

As a result, China now accounts for 7% of EU exports, but provides almost a quarter of all imports from outside the bloc. China’s surplus with the EU and the UK now represents almost a third of its entire global trade balance, which has exceeded 1 trillion for the first time.

This asymmetry means European companies lose sales to China and face increased domestic competition from cheap products. Additionally, they are more competitive in other international markets as Chinese companies rapidly increase their shipments of cars and other products to the rest of the world.

Germany is the epicenter of this shift in trade relations with Beijing.

In 2019, China recorded a deficit of 25 billion with Europe’s largest economy. In the first 11 months of this year, this turned into a surplus of 23 billion, due to the collapse of German imports.

The result is a stagnant German economy, hurt by job cuts and growing competition from China at home and abroad. German industry has shed more than 10,000 jobs per month this year, according to the federal statistics agency Destatis.

Combined with high energy prices and challenges such as an aging population, this weakness has led Chancellor Friedrich Merz’s advisers to cut Germany’s growth forecast to less than 1% for next year.

The Chinese advantage is not limited to high-tech manufactured products such as electric vehicles. The country’s companies continue to dominate the production of inexpensive consumer goods, clothing and shoes.

Shipping of cheap products through e-commerce sites has increased every year since the pandemic and increased by an additional 56% in the first ten months of this year compared to the same period in 2024.

Rapidly increasing exports “could create a false sense of security that China’s current policy of focusing on security and self-sufficiency – while reaping the benefits of its dominant position in global trade – is correct and sustainable,” according to a recent report from the EU Chamber of Commerce.

But as pressure for a response increases, countries can “not only use existing trade instruments like anti-dumping tariffs, but also develop new tools and approaches to deal with what is becoming a serious and unsustainable situation,” said Wendy Cutler, a former U.S. trade negotiator now at the Asia Society Policy Institute.