Escalating trade disagreement between the EU and China receives a warning from the former entity
In the mid-year of 2025, EU-China trade relations are marked by a blend of sharp tensions and cautious progress. The relationship is characterised by a significant trade imbalance, tariffs, and critical raw materials like rare earths.
The EU has a substantial trade deficit with China, exceeding €300 billion in 2024. Chinese exports to the EU are more than double the EU's exports to China, a gap that is widening as China strengthens its leadership in industries such as electric vehicles, rare earths, and artificial intelligence.
The EU's response to this imbalance has been the imposition of steep tariffs on Chinese-made electric vehicles, adding 17-35% to the standard 10% tariff. China, in retaliation, has imposed probes and tariffs on EU products like brandy, pork, and dairy, escalating tensions. Both sides have taken unilateral protectionist measures, complicating negotiations.
China holds a virtual global monopoly on rare earths, essential for advanced technologies. Recently, China has eased some export curbs, with rare earth exports surging 32% in June 2025 compared to May and increasing 60% year-over-year. This progress is welcomed by the EU but seen as only a first step toward more balanced trade relations.
The EU is insisting on more balanced trade, better market access for European companies in China, and meaningful Chinese action to mitigate industrial overcapacity driven by subsidies. However, the recent EU-China summit in Beijing made limited progress, with mistrust and opposing interests remaining significant barriers.
Despite contentious issues in trade, international security, or human rights, the EU sees room for cooperation with China in the area of environment and climate. Both sides have agreed to present new national climate targets for the year 2035 before the UN climate conference COP30 in Brazil's Belém. China and the EU have also signed a joint climate protection declaration, committing to do more for the climate and the Paris climate agreement.
Chinese President Xi Jinping believes there is no fundamental conflict of interests between China and Europe. However, the EU continues to criticise unfair subsidies, growing overcapacities, and market access problems for European companies in China. The EU's calls for reciprocity in market access and China's state-aided industrial competitiveness suggest that trade relations will continue to be a mix of negotiation, protectionism, and strategic competition in the near future.
In a recent development, Von der Leyen announced a new mediation path for addressing issues of shortages related to rare earths. Details about this path remain unclear. The EU also criticises China's export controls on seven rare earths and magnets made from them, which have caused concern worldwide, affecting planning security for German and European companies.
The Ukraine war is a major topic in the EU-China summit, with the EU calling on China to use its influence on Russia to end the war. Contrastingly, Brussels has not sanctioned any Chinese companies in the latest sanctions package against Russia.
In conclusion, EU-China trade relations in 2025 are tense and complex, dominated by the EU’s calls for fairer trade and balanced access, China’s industrial policies, and strategic control over critical raw materials like rare earths. Modest progress on rare earth export easing offers cautious hope, but fundamental tensions over subsidies, tariffs, and market access remain unresolved and will shape future developments.
- The escalating trade tensions between the EU and China, marked by the imposition of tariffs and critical raw material disputes, have led the EU to impose steep tariffs on Chinese-made electric vehicles, causing concern over energy costs in the industry.
- As China strengthens its leadership in environmental-science sectors like rare earths, the EU calls for a change in policy and legislation to ensure a more balanced trade relationship, citing the need for environmental-science and energy industries to combat climate-change.
- Recent developments in finance, with the announcement of a new mediation path for addressing rare earth shortages, may help ease tensions between the two trade giants and secure energy and climate stability for both parties.
- On the political front, the Ukraine war and war-and-conflicts discussions at the EU-China summit have highlighted the need for collaboration between China and the EU in resolving international conflicts, despite opposing interests in trade and human rights.
- General news regarding future EU-China relations will continue to focus on navigation through the complexities of trade, climate, and political disputes, with the potential for environmental cooperation and resolving critical material issues potentially shaping a more harmonious future.
