According to data compiled by Statista, the European Union’s goods trade deficit with China reached roughly €360bn in 2025, reflecting a persistent gap between imports and exports that has steadily expanded over the past decade. The imbalance underscores a deeper shift in global manufacturing, as China consolidates its position across a growing number of industrial sectors.

“Free trade is good for consumers: lower prices, more choice, more competition,” Marcos Agustín, President, Renaissance Europe Institute said in a social media post, adding the conditions underpinning this exchange are far from symmetrical. “But when one side combines state subsidies, cheap credit, cheap energy and industrial overcapacity, the result is not normal competition. It is industrial displacement.”

European industry has already felt the effects. Over the past 15 years, domestic producers have lost ground in solar panels and consumer electronics, but the range of products is widening and now includes batteries, chemicals and electric vehicles. Brussels has opened multiple investigations into Chinese subsidies, particularly in the EV sector, where imports have surged.

The concern is not simply about lost market share, but about long-term dependency. As one senior EU official put it privately, the bloc risks repeating the strategic vulnerabilities exposed during the energy crisis, when reliance on external suppliers translated into economic and political leverage.

“The cheapest import today can become the most expensive dependency tomorrow,” Agustín said. “The answer is not protectionism everywhere. It is strategic realism.”

This has prompted a gradual recalibration in European policy. Rather than a wholesale turn towards protectionism, policymakers are coalescing around a more selective approach — one that seeks to preserve the benefits of global trade while shielding critical sectors.

That approach is increasingly visible in EU policy debates, from the Net-Zero Industry Act to reforms of public procurement rules. The emerging consensus rests on three pillars:

Free trade for normal consumer goods;
European production in critical sectors; and
Public procurement for European strategic industries.

In practice, this means allowing continued competition in low-risk consumer markets, while using subsidies, regulation and procurement to nurture domestic capacity in areas such as clean energy, semiconductors and advanced manufacturing.

The challenge for Brussels will be to strike that balance without triggering retaliation from Beijing or fragmenting the global trading system further. For now, however, the direction of travel is clear: Europe is moving away from a purely liberal trade model towards one shaped as much by geopolitics as by economics.