EU‑China Trade Outlook
Citi analysts note that the European Union’s trade deficit with China now exceeds €1 billion per day, intensifying pressure on Brussels to contemplate stronger policy measures aimed at rebalancing bilateral trade. The latest EU‑China agreement, which limits Chinese hybrid‑vehicle exports to the bloc, is seen as a potential springboard for broader negotiations, though Citi cautions that further restrictions remain possible.
China’s trade surplus with the EU reached $291.7 billion in 2025, representing an 18.1% year‑on‑year increase and more than double the $113.8 billion recorded in 2019. In the same year, Chinese exports to the EU grew 8.4%, while EU imports from China fell 0.4%, further widening the imbalance. The surplus accelerated in the first nine months of 2026, rising 26% compared with the prior year.
China’s share of total EU imports climbed to 22.4% in 2025, even as Europe’s share of Chinese imports continued to decline. Citi expects that Brussels could introduce additional trade measures targeting Chinese goods, which may increase friction between the two economies. Beijing might respond with practical concessions, including commitments to raise imports, sector‑specific agreements, and reductions in value‑added‑tax export rebates.
The analysts argue that the prospect of substantial economic damage on both sides should deter an escalation comparable to the 2025 U.S.–China trade confrontation. Nevertheless, prolonged uncertainty over trade policy could weigh on economic growth in 2027. For China, the stakes are heightened as policymakers face pressure to keep annual economic growth near 4%. Citi projects that trade‑related uncertainty will remain a significant challenge for Chinese exports and the broader economy throughout the next year.