EU's China policy vacuum exposed as Trump returns and trade deficit widens

The European Union enters the second quarter of 2025 without a functioning China strategy. That is not a new observation, diplomats in Brussels have whispered it for years, but the return of Donald Trump to the White House has turned a chronic weakness into an acute vulnerability. Three months into his second term, the administration has already threatened tariffs on European steel, automobiles and pharmaceuticals, pressed allies to align export controls on semiconductors, and signalled that security guarantees are transactional. Beijing, meanwhile, has watched the transatlantic rupture with the patience of a creditor who knows the debtor has nowhere else to turn.

The strategic vacuum inherited from 2019

The root of the paralysis lies in the EU-China strategic outlook adopted by the European Commission in March 2019. The document, endorsed by the European Council that June, described China in a single sentence as a "cooperation partner, negotiating partner, economic competitor and systemic rival". The formulation was hailed at the time as a mature synthesis of competing national views. In practice it gave every capital the licence to emphasise the label that suited its domestic politics. Germany leaned on "cooperation partner" to protect automotive exports. France and the Nordic states highlighted "systemic rival" to justify investment screening. The Commission itself oscillated between "negotiating partner" on climate and "economic competitor" on subsidies.

What was presented as balance became a licence for drift. The outlook contained no hierarchy among the four labels, no mechanism for resolving contradictions, and no sunset clause. Six years later, it remains the only agreed EU-wide framework. A scheduled review in 2023 was quietly dropped after member states failed to agree on terms of reference. The result is that the world's largest single market engages its second-largest trading partner through a prism that was already outdated when the ink dried, before Hong Kong's national security law, before the Xinjiang forced-labour allegations reached the WTO, before the war in Ukraine made Chinese support for Russia a daily strategic fact.

Trade numbers that contradict the rhetoric

The gap between language and reality is now quantifiable. According to Eurostat's international trade database, the EU's goods deficit with China reached €304.5 billion in 2024, a 4.6 per cent increase on the previous year. Imports from China rose to €517.8 billion while exports stagnated at €213.3 billion. The deficit in machinery and transport equipment alone widened to €98.2 billion. European manufacturers lost market share in China across automotive, chemicals and industrial equipment, sectors where the Commission's own industrial strategy identifies strategic autonomy as a priority.

The numbers are not an anomaly. The deficit has grown in eight of the last ten years. In 2015, the year before the strategic outlook process began, it stood at €176.3 billion. The Commission's 2020 communication on a "new EU-China agenda" promised "reciprocity" and "level playing field" measures. Since then, the anti-subsidy investigation into Chinese electric vehicles, the most aggressive trade action Brussels has taken, has produced provisional duties that Beijing has challenged at the WTO while European carmakers warn they will raise costs for their own Chinese joint ventures. The investigation into medical devices, opened in April 2024, remains at the evidence-gathering stage.

Trump's return forces a choice Brussels has avoided

The Trump administration's first term already forced the EU into a de facto alignment on Huawei, Hong Kong sanctions and Xinjiang import bans. European officials privately resented the pressure but accepted the cover it provided for measures they struggled to adopt unanimously. The second term removes even that alibi. The White House has made clear it expects allies to mirror US export controls on advanced semiconductors, quantum computing and artificial intelligence, areas where European companies such as ASML, Infineon and STMicroelectronics have deep Chinese revenue exposure. It has also signalled that the Inflation Reduction Act's local-content requirements will not be waived for European firms, undercutting the transatlantic clean-tech cooperation the Commission had banked on.

Faced with an unpredictable Washington, the logical European move would be to deepen engagement with Beijing on trade, climate and financial stability, not as an alternative to the alliance but as a hedge. Yet the EU arrives at this moment without a mandate to negotiate. The Comprehensive Agreement on Investment, concluded in principle in December 2020, remains frozen after the European Parliament suspended ratification in response to Chinese sanctions on MEPs. The High-Level Economic and Trade Dialogue, the main ministerial channel, has not met since September 2023. The Strategic Dialogue, the foreign-policy equivalent, last convened in July 2024. At working level, Chinese counterparts report that European interlocutors frequently cancel or defer meetings pending "coordination" that never concludes.

Beijing's patience wears thin

Chinese officials have been unusually explicit about their frustration. In a briefing to European journalists in Beijing last month, a senior foreign ministry spokesman said China "hopes the EU will demonstrate strategic independence" and warned that "prolonged hesitation" would "narrow the space for cooperation". The language is calibrated: not a threat, but a statement that Beijing has other options. Since 2022, China has deepened its strategic partnership with Russia, expanded the BRICS grouping to include Iran, Saudi Arabia and the UAE, and accelerated the internationalisation of the renminbi through the mBridge cross-border payments project with the BIS Innovation Hub. European companies report that Chinese regulators are increasingly directing procurement toward domestic or non-European suppliers in sectors from telecoms to high-speed rail.

The irony is that China's own economy needs European technology and capital. The property crisis, demographic decline and weak domestic consumption have made the European market, still the destination for 14.7 per cent of Chinese exports, more important to Beijing than at any point since the financial crisis. But the leadership in Zhongnanhai calculates that a fragmented EU will eventually concede market access on Chinese terms rather than risk a rupture. That calculation has held so far. The question is whether it survives a scenario where Washington demands a full decoupling that Europe cannot afford but also cannot resist.

The member state divide that paralyses Brussels

The Commission cannot act without a Council mandate, and the Council is split along familiar lines. Germany's coalition government, led by Olaf Scholz until the February 2025 election and now in caretaker mode, has consistently opposed measures that risk retaliation against German carmakers. France under Emmanuel Macron has pushed for "European sovereignty" but defines it primarily as strategic autonomy from the US, not as a harder line on China. The Nordic and Baltic states, joined by Poland and the Czech Republic, favour alignment with Washington and view any engagement with Beijing as a concession to authoritarianism. Italy, Spain and Greece prioritise Chinese investment in ports and infrastructure. Hungary and Slovakia, under Viktor Orbán and Robert Fico, openly court Chinese political and economic ties as a counterweight to Brussels.

This geography of interest makes unanimity, the default rule for foreign policy and trade defence, nearly impossible. The Commission's fallback has been "coordination" through the European External Action Service and the trade directorate-general, producing joint statements that paper over differences. The last European Council conclusions on China, adopted in June 2024, ran to 1,200 words and contained no operational commitments. The next scheduled discussion is the October 2025 European Council, by which point the US mid-term congressional elections will be six weeks away and the window for any pre-emptive European initiative will have narrowed further.

What a European China policy would require

Analysts across the spectrum, from the European Council on Foreign Relations to the Mercator Institute for China Studies, converge on three minimum requirements. First, a hierarchy of objectives that replaces the 2019 quartet with a ranked list: security and human rights non-negotiables, reciprocity in market access as a condition for deepened trade, climate and health as areas for structured cooperation. Second, a decision-making mechanism that moves key China decisions from unanimity to qualified majority voting, at least for trade defence and investment screening. Third, a dedicated envoy or high representative mandate with the authority to speak for the 27 in real time, ending the current spectacle where the Commission president, the Council president, the High Representative and the rotating presidency issue parallel messages.

None of these is technically difficult. The Treaty on European Function allows qualified majority voting for commercial policy (Article 207) and the Council can delegate implementation powers to the Commission (Article 291). The High Representative already holds a dual hat as Commission vice-president and Council chair for foreign affairs. What is missing is political will. The 2024-2029 Commission under Ursula von der Leyen's second term has signalled a "competitiveness compass" that prioritises deregulation and defence spending. China policy appears as a sub-chapter of trade defence, not as a strategic portfolio. The European Parliament's committee on foreign affairs has drafted an own-initiative report calling for a "reset", but the plenary vote is not scheduled before January 2026.

The autumn deadline that cannot be missed

The next inflection point is not a European summit but a Chinese one. The 20th Central Committee's third plenum, expected in October 2025, will set Beijing's economic direction for the next five years. If the leadership signals a further turn toward state-led technological self-reliance, the "new productive forces" doctrine, European companies in advanced manufacturing, pharmaceuticals and green tech will face a market that is legally open but commercially closed. The EU's anti-coercion instrument, activated for the first time in January 2025 against Chinese intellectual-property restrictions on European firms operating in China, will face its first real test. A credible European response requires a mandate that does not yet exist.