Europe and China may be heading for a trade war. The European Commission said on May 29 that its economic and security interests will require “a more robust and coherent response” to a surge in Chinese exports to the bloc. The current situation is “not sustainable,” it said.
For its part, China accused the Commission of seeking a scapegoat for Europe’s own ills and resorting to “protectionism.” It has just published academic papers to set out its case, saying that the EU’s strategy is built on illusions. Their arguments are worth studying.
The rhetoric has sharpened ahead of a European leaders summit later in June. EU Commissioners are discussing ways to deal with what some call “China Shock 2.0.” Critics of China say it is exporting overcapacity and destroying markets in other countries. China rejects the charge.
In 2025, the European Union’s goods trade deficit with China expanded to €359bn ($418bn), up almost 15% from the figure a year earlier, and more than double the deficit recorded in 2019, the last year before the COVID-19 pandemic.
China sold almost €560bn worth of goods to the bloc in 2025, continuing a trend in which its exports to Europe rose dramatically after the pandemic and during the war between Russia and Ukraine.
It is also “nearshoring” investments in countries close to the EU, like Morocco, which have free trade deals with the EU and might provide a way around future EU tariffs. Senior European officials have called this a “big, big issue.”
Meanwhile, European exports to China have continued to weaken. In 2025, exports fell to just under €200bn. The word most often heard in Brussels and in some capitals is “unsustainable.”
Among ideas under discussion are tariffs, quotas, and “safeguard measures” that would oblige European companies to diversify supply chains, reduce dependence on Chinese manufacturers, and cut their reliance on strategic industrial minerals for which China is the main supplier.
While there has been ample coverage of the debates in Brussels, the Chinese side has until now kept to a low-key approach towards the Europeans.
One reason, diplomats say, is that the leadership has been focused on disputes with the United States and on the recent summit between President Xi Jinping and President Donald Trump. Chinese leaders are also preoccupied by what they call the “wind and rain” in world affairs, represented by the wars in Ukraine and the Middle East.
They have, however, woken up to the impending pressure from Europe, and it should come as no surprise that they are well-prepared.
“It is not the European Union’s trade with China that is ‘not sustainable’ but the EU’s own policies and practices,’ declared a commentary in the China Daily as a prelude to a wordy critique that might have come from the keyboard of a free trade liberal.
It said the real problems facing European businesses were not caused by China but by high energy costs, burdensome regulation, costly compliance requirements, and layers of new rules in the environmental, digital, and competition spheres.
“Indeed, Brussels’ recent actions suggest a growing tendency to substitute regulatory activism for genuine policies to promote industrial renewal,” it concluded.
While trading barbs is par for the course, it would be a mistake to ignore the signs of a deep intellectual and administrative preparation by China to adapt to pressure from Europe, just as it successfully responded to President Trump’s initial tariffs.
Although Chinese leaders like to radiate calm, for an economic and political system geared to stability, the volatile state of global politics is a challenge. And while there are strains in the domestic Chinese economy, the country’s export machine is vital.
That is why it is worth studying a paper issued by the state news agency Xinhua on May 29 in response to the arguments put forward in Brussels. The paper, by three specialist academics, sets out the kind of negotiating positions which European officials may expect to hear. It is, in effect, a manifesto of confidence.
“The real threat to the EU is not China’s ‘overcapacity’, it is Europe’s own lack of innovation and its closed markets,” the report said. The writers scorn the concept of decoupling from China.
“The truth is that the very notion of decoupling was first raised by the US and the Europeans after the COVID-19 pandemic, when elites… suddenly recognized how greatly they depended on China,” it says.
Without “Made in China,” Western countries could hardly organize their pandemic response, it argues. In an apparent reference to EU Commission President Ursula von der Leyen, the writers say that after several years, decoupling failed, “so it was rebranded as de-risking, in effect a euphemism to say removing the risk posed by China.”
The writers warn against underestimating the Chinese economy and criticize projections that Chinese growth will gradually decline to around 1% per annum by 2035.
The paper also dismisses any comparison between China and the European Union in confronting the need to reduce debt.
“The structure of that debt suggests that China’s resilience is greater than that of the European Union,” the writers argue.
China’s debt, they say, is largely domestic debt and “productive”. It funded Chinese investment in the world’s largest infrastructure networks in several key sectors, including high-speed rail, electricity transmission, and 5G telecommunications.
The writers affirm that China leads globally in industrial capacity, has one of the highest national savings rates in the world, and has huge state-owned assets, giving it the ability to mobilize resources and restructure debts.
In contrast, the paper argues, EU member states are “in a welfare trap,” their fiscal spaces locked up by high social welfare and pension spending, with little left for strategic industrial investment.
The writers argue that it is an illusion to think that constraining China will work in a new economic era.
They warn that the EU, through protectionism, would merely accelerate its own de-industrialization, while China will “ultimately emerge as the biggest beneficiary of a new era of economic globalization” as its industries scale the value chain in fields like electric vehicles and cheap artificial intelligence.
“What Europe needs to recognize is that China’s economic fragility is a challenge of transition, not systemic collapse,” the writers say, arguing that the foundation of the Chinese economy is far more solid than people in Brussels think.
Finally, the paper holds out the prospect that the Chinese and European economies could be seen as complementary because China can provide high-value-for-money industrial goods and complete supply chains, while Europe can offer high-end technology, design capabilities, and brand management expertise.
The mixture of blandishment and threats is a familiar hallmark of Chinese trade diplomacy. But it is unusual to see the position laid out at such length, in such detail, and with such confidence by government-authorized academics. Studying what the Chinese state says is always worthwhile, so armed with this knowledge, let the Europeans go and negotiate.
Michael Sheridan is a veteran British foreign correspondent and is the author of ‘The Gate to China’, an acclaimed history of Hong Kong, and ‘The Red Emperor: Xi Jinping and His New China’, which is published by Hachette Books and has been translated into a dozen languages, including Ukrainian, Polish, and Japanese.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
