The EU is experiencing a protracted “China shock” as a flood of Chinese language EVs into Europe helped push Beijing to a file surplus with the bloc.
New information confirmed China’s commerce surplus – the place its exports to the EU exceeded imports from the bloc – was $83bn (£61bn) within the first three months of 2026.
China bought items price about $148bn to the EU within the first quarter, however imported simply $65bn from the bloc, in keeping with evaluation of 2026 customs information by Mercator Institute for China Research (Merics). The excess for the entire of 2025 stood at €360bn.
The file was pushed partly by Europeans’ obvious unstoppable urge for food for Chinese language automobiles, together with BYD which has declared it desires to develop into the world’s greatest automaker.
Gross sales of Chinese language electrical and hybrid automobiles nearly doubled from $11bn (£8.1bn) within the first three months of 2025 to $20.6bn for a similar interval this yr. This accounted for a 3rd of the worth of all Chinese language EV exports.
When the UK, Norway and Switzerland are included, Europe accounts for 42% of Chinese language gross sales of EVs, which have seen a 50% surge in March within the wake of the Iran warfare.
Merics, which crunched the numbers together with Chinese language commerce website Soapbox, mentioned China’s economic system had to date proven resilience within the face of the Iran warfare with the “largest quarterly progress figures … since 2022”.
Soapbox figures launched final week confirmed that exports from the EU to China fell 16.2% in February, with pork shipments notably in decline.
Though China imports quite a lot of its oil from the Gulf – the place site visitors by the essential strait of Hormuz has floor to a close to standstill – it has been much less impacted than different Asian international locations and has been in a position to faucet into substantial reserves.
“To date, China’s commerce with the world has been barely affected by the battle within the Center East,” Merics mentioned.
In February, the thinktank Bruegel mentioned the EU was “experiencing a extreme and accelerating ‘China shock’” with Xi Jinping’s new five-year plan displaying no indicators of change in export coverage in Beijing.
The bloc has proposed a “Made in Europe” industrial technique in an try to guard “strategic sectors” of European business. China has warned the EU it should retaliate with “countermeasures” if the brand new legal guidelines discriminate unfairly in opposition to Chinese language exports to the bloc.
Its ministry of commerce mentioned the EU Industrial Accelerator Act would lead to discrimination that “runs counter to primary market economic system rules corresponding to business voluntariness and truthful competitors”. The UK has additionally complained it discriminates in opposition to British automotive exports.
A spokesperson for the European Fee mentioned the proposed laws complied with World Commerce Group guidelines and China benefited from entry to “some of the open markets on this planet” and it anticipated the “openness to be mutual”.
The Fee’s deputy chief spokesperson, Olof Gill, mentioned coverage proposals “are rigorously calibrated to realize sure financial and wider objectives for our residents, for our companies” and it was “completely happy to interact” with China on any challenge.
Over the past three years the EU has deployed what has been described as a “good cop, dangerous cop technique” with Beijing, with EU leaders courting funding however on the similar time arguing for a rebalancing or “derisking” of the commerce relationship.
In February, the German chancellor, Friedrich Merz, mentioned the yawning commerce hole was “not wholesome” and he wished to cut back the commerce deficit that had “quadrupled” in 5 years.
Brussels has tried to dampen imports of Chinese language automobiles, imposing tariffs of as much as 35% on some manufacturers in 2024.
It has additionally launched initiatives to assist EU firms cut back reliance on uncommon earths corresponding to everlasting magnets, utilized in all the things from automotive window locking programs to fridge and washer doorways.
The brand new customs information confirmed that China nonetheless accounts for 93% of everlasting magnets with import volumes growing 18% yr on yr.
There are not any uncommon earth mines in Europe however there are excessive hopes that LKAB, a state-owned iron ore mine within the Swedish Arctic, might be shut to creating extraction and processing viable.
Trade leaders have famous how ineffective the EU’s commerce measures might be, with the boss of Europe’s first plant producing lithium hydroxide, a key ingredient in automotive batteries, warning that the EU might as nicely “be a province of China” on account of its reliance on their imports.
