EU-China trade tensions Three months to avoid a trade war?

Research evidence excerpt

EU-China trade tensions Three months to avoid a trade war?

7 July 2026

EU-China trade tensions EconomicsGlobal

Three months to avoid a trade war?

◆ EU-China trade tensions have escalated recently… Shanella Rajanayagam

Trade Economist

◆ …but the parties are co-operating to tackle bilateral issues HSBC Bank plc

shanella.l.rajanayagam@hsbc.com

+44 20 3268 4118

◆ Watch for stronger trade defence measures and possible

Frederic Neumann

retaliation if co-operation does not yield results by October Chief Asia Economist, Co-head Global Research Asia

The Hongkong and Shanghai Banking Corporation Limited

fredericneumann@hsbc.com.hk

EU-China trade tensions have escalated in recent years as the bloc grows +852 2822 4556

increasingly concerned over its unbalanced goods trade relationship with China. Michael Tyndall*, CFA

Senior Global Autos Analyst

Today, the EU’s goods trade deficit with China stands at EUR376bn annually. Put HSBC Bank plc

another way, that is a bilateral deficit of more than EUR1bn per day. In the year michael.tyndall@hsbc.com

+44 20 3359 6301

ended April 2026, all EU member states ran a trade deficit with China in goods.

Indeed, China has been the EU’s top source of external merchandise imports since * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

2005, with 17 out of 27 EU members now regarding China as their top source of not registered/ qualified pursuant to FINRA regulations

imported goods outside the bloc.

As a result, the EU is looking to strengthen its trade defences. It has proposed the

Industrial Accelerator Act to prioritise EU (and FTA partner) goods in public

procurement, proposed revising the Cyber Security Act to limit Chinese firms from

critical infrastructure, and is considering plans to require EU companies in sensitive