China trade surplus fuels new concerns in Europe

Highlights

China’s EU trade surplus rose 27% to $32.9 billion in June.
Exports to the bloc reached a record.
China’s first-half exports to the EU rose 17% to $312.3 billion.
The growing imbalance keeps trade-conflict risks elevated.

China’s surplus with the EU increased 27% from a year earlier to $32.9 billion in June, according to Chinese customs data cited by Bloomberg. Exports to the bloc reached a record, while China’s surplus with Germany more than doubled from a year earlier, and its surplus with France fell 81%.

Exports widen the imbalance

The June data point to a widening gap in trade flows at a time when China is relying heavily on exports to offset weak domestic demand. For the first half of the year, China imported $135.6 billion of goods from the EU, up 9% from a year earlier. Its exports to the bloc reached $312.3 billion, up 17%.

Macquarie economists, led by Larry Hu, said the growing surplus keeps the risk of a China-EU trade conflict elevated, even after a three-month trade truce. The imbalance is likely to deepen concern in Europe that Chinese manufacturing overcapacity is pushing large volumes of cheaper goods into foreign markets.

European leaders have increasingly described the issue as a strategic risk. French President Emmanuel Macron called the imbalance a matter of “life or death” for European industry after visiting Beijing late last year.

Currency and competitiveness come into focus

Germany has also moved the exchange-rate issue back into the debate. Chancellor Friedrich Merz called for a political currency dialogue with China, pointing to the yuan as part of the country’s trade advantage.

Deutsche Bank strategist Shreyas Gopal estimated that the yuan is about 15% below fair value against the euro, compared with 20% a year ago. The currency has risen more than 6% against the euro this year and reached its strongest level since March 2025 last month, but it remains about 13% weaker than its 2022 peak.

Beijing has pushed back against restrictions. Chinese officials have called for an “upward balance” in trade, arguing that the answer is more cooperation and wider European access to China rather than limits on exports.

Europe weighs its response

The record surplus matters because it gives Brussels more reason to consider defensive trade measures. European policymakers argue that subsidies and excess capacity are distorting competition, while China sees exports as an important support for growth.

The two sides have set an October deadline to make progress on trade disagreements, but the gap remains wide. Europe wants China to curb overcapacity and rebalance trade. Beijing wants to preserve access to foreign markets while avoiding new restrictions.

As we previously reported, China-EU economic ties are called fundamentally complementary.

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