EU leaders to discuss anti-China trade measures at summit dinner amid €360bn deficit

When EU leaders sit down for dinner at the European Council on Thursday evening (18 June), the agenda item will be listed as "global macroeconomic imbalances."

However, everyone in the room understands what this truly means. "We all know the imbalances discussion is about China," one senior EU diplomat said in a background briefing ahead of the summit.

Europe's trade deficit with China reached €360 billion in 2025 — roughly €1 billion per day. The European Commission and a growing group of member states are pushing for stronger measures to protect European industries.

"It amounts to the destruction of our industrial base," said a diplomat from a major EU country.

Yet member states have so far failed to agree on a coherent response. Some governments with deep commercial ties to China — including Germany, Spain, and Greece — remain reluctant to antagonise Beijing.

According to one EU official, Thursday's objective is to give the Commission "very powerful political guidance" on whether to adopt a tougher stance toward China, and in what form.

Cheap High-Tech

For years, the primary concern about China was its flooding of European markets with low-cost goods. Since the pandemic, however, this dynamic has shifted.

China now increasingly sells high-tech products in European markets that are both cheaper and of higher quality than domestic alternatives. For the first time, every single EU member state recorded a trade deficit with Beijing in 2025.

According to a widely-shared policy brief by the Berlin-based Centre for European Reform (CER), China now accounts for roughly 30 percent of global manufacturing output while consuming only 13 percent of global output.

This trend now threatens the survival of European industries. Last year, Chinese electric vehicle (EV) exports to Europe rose by 26 percent compared to the previous year, despite EU tariffs introduced a year earlier.

Experts warn this could be just the beginning. China can produce at least 25 million EVs annually but sells only around half that domestically, leaving a vast surplus to flood global markets.

According to CER, 55 percent of European manufacturing is exposed to Chinese market-share gains in the coming years, driven in part by what it estimates is a 30 percent undervaluation of China's currency, the renminbi, offering an unfair advantage over foreign competitors.

China's exports of electric vehicles surged after the pandemic. Source: Centre for European Reform

European Commission President Ursula von der Leyen will open Thursday's dinner with a presentation on macroeconomic imbalances, nearly a year after she warned China's Xi Jinping that EU-China trade relations had reached an "inflexion point."

While the Commission has proposed various measures since, member states have not yet agreed on a coherent China strategy. Thursday's dinner is intended to generate a political mandate from member states for the EU to finally move forward — although fears of Chinese retaliation are likely to weigh heavily on their minds.

Those concerns stem in part from October 2024, when the Commission imposed tariffs on Chinese electric vehicles, prompting Beijing to launch investigations into several European exports, including French cognac, Spanish pork, and German luxury cars.