The €1bn-a-Day Question: What Comes Next for EU–China Trade?

The recent EU-China hybrid-vehicle deal raises a key question: will it pave the way for negotiations that meaningfully rebalance EU-China trade, or risk fueling escalation into a full-blown trade war? China's goods surplus with the EU reached US$291.7bn in 2025, up 18.1% YoY and more than double the pre-Covid level, and widened another 26.0% YoY in 26Q1-3, with the EU deficit now exceeding €1bn per day. The surplus is broad-based: China runs surpluses with 23 of 27 member states, Germany has flipped from a US$25.3bn deficit to a similar-sized surplus, and electrical equipment plus machinery account for roughly half of the total, while transport equipment turned into surplus in 2024 on booming EV exports. The hybrid deal looks too small to rebalance trade, since hybrids were just 1.2% of China's EU exports and combined BEV and HEV only 3.2%. More EU trade measures look plausible, including safeguard investigations into chemicals and plastics and new tools such as the Industrial Accelera