Updated · Peterson Institute for International Economics · Jun 3
EU Splits Over China Curbs in New Industrial Plan as Trade Deficit Hits €360 Billion
Updated
Updated · Peterson Institute for International Economics · Jun 3
EU Splits Over China Curbs in New Industrial Plan as Trade Deficit Hits €360 Billion
3 articles · Updated · Peterson Institute for International Economics · Jun 3
Summary
Five EU countries—France, Spain, the Netherlands, Italy and Lithuania—pressed Brussels for tougher China measures, while Germany and several Scandinavian states resisted excluding China from procurement and subsidy access under the proposed Industrial Accelerator Act.
The split comes as Brussels faces mounting pressure from Chinese subsidies, dumping and overcapacity; EU trade-defense cases against China rose from 7 in 2024 to 17 in 2025, with more than 50 ongoing this year.
China remains the EU’s third-largest trading partner, but the bloc’s deficit has widened to €360 billion and dependence on Chinese rare earths and critical materials still limits how fast Europe can tighten policy.
Ursula von der Leyen has kept the line at “de-risking” rather than decoupling, yet member-state divisions and disagreements inside the Commission are complicating efforts to replace the EU’s outdated 2019 China strategy.
The debate is set to continue at the mid-June G7 and European Council meetings, as the EU tries to pair new trade deals elsewhere with a more coherent China policy.
The US trade deal expires in 2028. Is Europe's 'de-risking' strategy enough to counter China's long-term industrial dominance?
As Germany deepens ties with China, can the EU forge a unified economic defense before its key industries are overwhelmed?
The EU’s Record €359.8 Billion Trade Deficit with China: Causes, Consequences, and the Road Ahead
Overview
The European Union faces a rapidly growing trade imbalance with China, driven by a record deficit that threatens key industries and jobs across Europe. This situation worsened after the US imposed high tariffs on Chinese goods in 2025, causing Chinese exports to the US to fall sharply while exports to Europe surged. As a result, the trade burden shifted onto the EU, exposing European sectors—especially automotive and green technologies—to intense Chinese competition. The EU is now under pressure to respond, but internal divisions and deep economic ties with China make finding a unified and effective strategy challenging.