Europe’s China Dilemma: The New Geopolitics of Free Trade
The European Union is struggling to balance its commitment to a rules-based free trade order with the reality of a massive and growing trade surplus with China. Despite expanding trade agreements globally, the EU faces structural economic challenges due to China's heavy industrial subsidies.
Why it matters
This highlights the growing geopolitical and economic friction between the EU and China, challenging the sustainability of current European trade policies.
China's goods trade surplus with the EU hit €360.6 billion in 2025, up 15% year on year, and expanded a further 10% in the first four months of 2026.
Over the past five years, the European Union has quietly built the largest network of modern free trade agreements in the world. New Zealand, Kenya, Australia, the Mercosur bloc, Singapore, Indonesia, India, and overhauled deals with Chile, Ukraine, and Mexico. Together these agreements now set the rules for close to a third of global GDP. Brussels has positioned this as a defense of the rules-based trading order at exactly the moment Washington abandoned it, offering the world predictability, multilateral standards, and shared gains instead of the discriminatory bilateral deals the Trump administration has been signing since 2025.
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