EU Targets China’s 20-25% Yuan Undervaluation as €359.9 Billion Trade Deficit Deepens
Updated
Updated · Euronews · Jun 23
EU Targets China’s 20-25% Yuan Undervaluation as €359.9 Billion Trade Deficit Deepens
3 articles · Updated · Euronews · Jun 23
Summary
EU leaders have elevated the yuan to a new front in their trade dispute with Beijing, arguing its estimated 20-25% undervaluation is worsening the bloc’s record imbalance with China.
€359.9 billion in 2025 marked the EU’s biggest annual trade deficit with China, and Brussels says Chinese goods remain about 30-40% cheaper than European equivalents.
German Chancellor Friedrich Merz urged direct talks with Beijing on currency management, citing the 1985 Plaza Agreement and Europe’s former exchange-rate corridor system as possible models.
Bruegel’s Alicia Ferro Herrera said the weak yuan may reflect China keeping export earnings offshore in Hong Kong rather than direct central-bank intervention, while Europe’s post-Ukraine inflation gap explains much of its lost competitiveness.
The dispute broadens EU scrutiny of China beyond tariffs and subsidies, with officials also weighing sector-by-sector export price monitoring as a signal of overcapacity.
Is Europe blaming China’s currency for its own internal economic failures?
Can the EU force a currency change on China without igniting a global trade war?
As the EU-China trade battle heats up, who will ultimately bear the cost?
Europe’s Record €360 Billion Trade Gap with China: Policy Divisions and the Threat to EU Industry
Overview
The European Union is facing a record and rapidly growing trade deficit with China, reaching €360 billion in 2025 and accelerating to about €1 billion per day in early 2026. This surge is driven by rising Chinese exports in key sectors, putting pressure on EU industries and prompting urgent policy debates. In response, EU leaders held a critical summit in June 2026 to discuss tougher measures, including limiting China’s access to strategic markets and diversifying supply chains. These actions highlight the EU’s urgent challenge to address the imbalance and reduce its reliance on Chinese suppliers.