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EU-China Trade Tensions Set to Intensify in 2026, Warns Report

A new report indicates EU-China trade relations are stagnant, with the EU continuing efforts to diversify away from Chinese dependence. The trade deficit remains stark, with Chinese exports to Europe far exceeding declining European exports to China. Despite calls from European leaders for cooperative rebalancing, China has not shown significant concern or willingness to adjust. Experts warn that the existing tensions over issues like EV tariffs and market access are likely to intensify further by 2026.

Key Points: EU-China Trade Tensions to Worsen in 2026: Report

  • EU diversifying trade away from China
  • Massive trade deficit persists
  • Tit-for-tat tariff disputes ongoing
  • US protectionism complicating issues
  • Calls for rebalancing go unheeded
2 min read

2026 to intensify trade tensions between EU-China: Report

A new report warns EU-China trade relations are at a standstill, with tensions over tariffs and deficits set to intensify by 2026.

"2026 will intensify the dynamics and tensions already visible in 2025 - Francesca Ghiretti"

New Delhi, Jan 10

The European Union, beyond tariffs and sanctions, set to continue on its trajectory of diversifying its trading relationships away from China and sharpening its trade defence armoury, developed with China in mind, but Beijing "doesn't seem much to care", according to a new report.

According to a report in Politico, the EU-China trade relations are "at a standstill", as German Chancellor Friedrich Merz is likely making his first visit to China next month.

"The trade deficit is not going to improve anytime; China is not going to consume our products. All of that is wishful thinking," Alicia Garcia-Herrero, chief economist for Asia-Pacific at French investment bank Natixis and a senior fellow at think tank Bruegel, was quoted as saying.

In December last year, Beijing announced "its latest counterpunch in a dispute over EU duties on Chinese-made electric vehicles imposed in 2024, setting punitive provisional duties on dairy products".

It was also clearly unhappy with German auto giant Volkswagen's bid to "wangle an exception to the EV duties", according to the report.

America's lurch into protectionism under President Donald Trump is displacing trade flows, making it even harder to resolve thorny issues such as market access and state subsidies. Chinese exports to Europe are on the rise again - and are more than double Europe's exports to China, which are in decline.

French President Emmanuel Macron wrote in an op-ed for the Financial Times recently that "Either we rebalance economic relations co-operatively - engaging China, the U.S. and the EU in a genuine partnership - or Europe will have no choice but to adopt more protectionist measures".

However, Chinese President Xi Jinping has yet to heed the calls to rebalance trade.

Experts warn that existing tensions may rise even further.

Francesca Ghiretti, director of the China Europe Initiative at the Rand think tank, was quoted as saying in the report that "2026 will intensify the dynamics and tensions already visible in 2025".

- IANS

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Reader Comments

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Priya S
The report saying China "doesn't seem much to care" about EU's trade defence measures is telling. It shows the confidence (or overconfidence) in their economic model. Europe's diversification away from China is a slow process, but it's a signal for countries like India to step up and fill the gap.
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Rohit P
Macron's op-ed hits the nail on the head. A cooperative rebalancing is needed, but with President Xi not heeding calls, more protectionism seems inevitable. This global trade fragmentation is bad for everyone in the long run. Hope sense prevails.
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Sarah B
Interesting to see the tit-for-tat with dairy products and EVs. While this is between EU and China, it shows how trade wars can spiral. India must be very strategic in its FTAs and avoid getting caught in the crossfire of these major power tussles.
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Vikram M
The massive trade surplus China enjoys with Europe is unsustainable. The EU is right to try and rebalance, but it's a tough fight. From an Indian perspective, our trade deficit with China is also a major concern. We need to learn from Europe's playbook on building a stronger trade defence.
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Karthik V
Respectfully, I think the article and some comments are missing a key point. The EU's own internal divisions (like Germany's Volkswagen seeking exceptions) weaken their position. A united front is essential for any trade negotiation to succeed. India should note this for its own dealings with trade blocs.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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