EU-China Trade Deficit Hits €359 Billion as Analysts Urge Pragmatism Over Security-Led Fragmentation

Economist Lorenzo Codogno argues for an EU-China trade relationship based on pragmatism rather than security risks to stabilize the global 2026 economy.

By: AXL Media

Published: Apr 15, 2026, 11:19 AM EDT

Source: Information for this report was sourced from LSE European Politics

The Cumulative Impact of Global Economic Volatility

The international economic landscape has endured a relentless succession of disruptive events over the last six years, reshaping how major trading blocs interact. Beginning with the global pandemic and followed by the energy crisis sparked by the invasion of Ukraine, the stability of European markets has been under constant pressure. The situation was further exacerbated by a US-led global trade war involving sweeping tariffs, culminating in the recent energy shocks following military actions involving the US, Israel, and Iran. These events have exposed the persistent vulnerabilities of the European Union, particularly its reliance on external energy imports which accounted for €337 billion, or roughly 1.9% of its GDP, in 2025.

The Structural Parallels Between Two Trading Giants

Both the European Union and China find themselves in remarkably similar positions regarding their economic dependence on trade and energy security. As the world’s primary trading blocs, both regions rely heavily on massive export sectors and the maintenance of trade surpluses to fuel prosperity. Historically, the EU has maintained high trade surpluses without sufficient domestic investment, while China has prioritized capital investment and exports over internal household consumption. According to analysis by Lorenzo Codogno, the Eurozone current account surplus has begun to narrow, dropping from €407 billion in 2024 to €255 billion in 2025, suggesting a gradual shift toward domestic resource allocation and security sector competitiveness.

Bridging the Widening Gap in Bilateral Trade

The bilateral trade balance between the EU and China remains sharply skewed, with total goods exchange reaching €759 billion in 2025. This relationship is characterized by a stark imbalance, where the EU exported €200 billion in goods while importing €559 billion from China, resulting in a deficit equivalent to 2% of European GDP. This discrepancy is largely a byproduct of China's status as a dominant industrial producer, where industry accounts for 37% of its gross value added, nearly double that of the United States. Codogno argues that while these figures are often viewed through a protectionist lens, they represent an efficient allocation of resources within a rule-based global system that is currently under threat from geopolitical division....