China’s trade surplus with Europe larger than with U.S. for first time

For the first time ever, China had a larger trade surplus with Europe than with the U.S. over the period of the last 12 months, posing serious questions over the future of European industry.

Except for three months in 2008, following the exceptional circumstances of the subprime crisis that severely impacted the US economy, this has never happened before.

According to Chinese customs data, between October 2024 and October 2025, the surplus with Europe reached $310 billion, compared with $302 billion for the surplus with the U.S.

Since 2019, China's trade surplus with Europe has almost doubled, and everything suggests that with Trump's tariffs, which make many Chinese imports far less attractive to the US market, this phenomenon is set to grow and continue.

Admittedly, with Chinese products being rerouted via Vietnam, Mexico, or other countries before reaching the U.S., it is likely that Beijing's surplus with Washington is underestimated.

Nevertheless, it is the U.S. that is taking a protectionist stance and closing its borders, not Europe, which finds itself exposed to Chinese industry and its exports.

Upmarket’ move

In an interview with business newspaper, Les Echos, Anthony Morlet-Lavidalie, an economist at French non-governmental macroeconomics research institute, Rexecode, highlighted China's ‘upmarket’ move which is taking place precisely in the segments where Europe historically held its main competitive advantages; namely in the transport sector; automotive today and aeronautics tomorrow, as well as capital goods such as machine tools and primary industries, like chemicals.

Europe is therefore not only feeling the heat from China in its domestic market but also in third markets. Given that the Chinese industry is so powerful on the global stage, it leaves European firms with no fallback solution for their exports.

This amounts to a second ‘Chinese shock’ for Europe, the first one being when China joined the World Trade Organization (WTO) in the early 2000s.

German industry under attack

A sizable chunk of European industry is accounted for by Germany, and it is Germany that the Chinese government has in its sights.

Between 2019 and 2024, German exports to China fell by 9%. Compare this with Chinese exports to Germany, which jumped by 40% over the same period.

Such a contrast is even more striking given that only six years ago, Germany had a trade surplus of around $30 billion with China, according to Chinese data. Over the past 12 months, it has a trade deficit of $25 billion.

In a study published earlier this month, the Cologne Institute for Economic Research noted that in the first half of 2025, US imports from China fell by nearly 16% compared to the previous year, while German imports from China rose by around 11%. What’s more, the prices of these goods fell by nearly 4%, pointing to Chinese suppliers inundating the German market with low prices.

While Chinese industry alone cannot be blamed for the difficulties of its German counterpart, it has nevertheless played a significant role. “German industry is suffering greatly. It has lost nearly 7% of its workforce compared to 2019, representing 500,000 manufacturing jobs lost in six years,” noted Morlet-Lavidalie. “There is no simple and effective solution to this complex problem.”

Partnerships and wider use of tariffs

One potential response to checking the advance of the Chinese industry could be for the European Commission (EC) to form a partnership with China, offering it access to the European market in return for a commitment to invest in Europe and set up joint ventures with companies, including technology transfers.

Increasing customs duties is another possible option. The argument for this is that Chinese industry benefits from generous state aid and an undervalued currency, giving it an unfair competitive advantage over its European rivals and allowing it to offer extremely low prices.

The EC must therefore resolve to make greater use of countervailing tariffs to restore a level playing field. But whether there is the political will to do so remains to be seen. Some influential voices would warn against such a strategy, as it could lead to retaliatory measures from China.

Tsunami’ warning

Nicolas Dufourcq, CEO of French state-run Bpifrance, whose broad remit encompasses serving as a bank to support business development and innovation, a sovereign fund and export credit agency, is alarmed at the position Europe finds itself in and is pushing for decisive action to combat Chinese industry.

In an opinion column in Les Echos, he pointed to Chinese exports to Europe that now account for 16% of the country’s total exports, compared with 10% to the U.S. A few years ago, it was the other way around.

“So there has been a redirection. Many now say that Europe must be closed down temporarily, so to speak, to allow it to rearm itself, industrially and logistically.”

He goes on to warn of a “tsunami” that will destroy all of Europe’s small-to-medium-sized businesses, from Poland to Brittany (in France).”

Submitting to a dual hegemony

Dufourcq said that business leaders returning from China had told him of their conviction that Europe must indeed protect itself or risk disappearing from the map of global industry. They added that in the global South, the battle had already been lost and this for years to come.

“The price and quality of Chinese industrial and technological goods are unbeatable, especially as the (Chinese) central bank is allowing the currency to slide.”

Europe is not far off from submitting to a dual hegemony, he warned; the U.S. in the digital sphere and China in industry.

At the current rate, China will have a 50% share of the global market in industry, and therefore in physical AI, 15 years from now. “Such dominance takes us back to England during the Industrial Revolution.”

He added: “Now, more than ever, we must wake up, stop squabbling and protect our industries, allowing them to make up lost ground.”

Rampant Chinese e-commerce

It is in cross-border e-commerce that China’s international trade dominance is most visible, with a tidal wave of cheap consumer goods, notably in fashion retail, heading for Western markets.

The elimination of the de minimis threshold by the Trump administration earlier this year has resulted in Chinese online marketplaces, such as fast-fashion mastodon Shein and Temu, switching from the U.S. and channeling far more of this trade into Europe, which was already a major outlet for its products and those of its third-party sellers.

According to Commission figures, 4.6 billion low-cost parcels entered the EU in 2024, with 91% originating from China. This represents double the volume recorded in 2023 and triple that of 2022. 2025 will almost certainly see a continuation of this trend and more.

European crackdown

France stands out for taking steps aimed at putting a check on the surge of e-commerce imports from China to protect not only its own garment-making and retailing sector but also consumers.

Shein has been in the crosshairs of the French authorities for some time with regard to the sale of non-compliant and illegal products.

The recent discovery for sale on its website of childlike sex toys triggered punitive action. After announcing temporary suspension proceedings against shein.fr, the government launched an unprecedented operation to inspect parcels from Shein arriving at Paris Roissy-Charles-de-Gaulle Airport, France’s main hub for air cargo.

The operation focused on ensuring the accuracy of declarations and compliance with tax and customs obligations. Initial findings revealed unauthorized cosmetics, dangerous toys for children, counterfeit goods, and faulty electrical appliances.

The French have also urged the European Commission to “crack down” on Shein by imposing sanctions on the company. France is leading similar investigations into other e-commerce marketplaces, too.

Also this month, European Union (EU) finance ministers approved the removal of customs duty exemptions for small parcels valued under €150 from 2026, marking a significant shift in how the bloc manages rapidly rising low-value imports from China. The EU is also talking about the introduction of a €2 customs fee per parcel.

However, there is skepticism as to whether these measures will do much to slow down the flood of Chinese parcels entering Europe.