The latest trade understanding between US President Donald Trump and China’s President Xi Jinping is easing immediate tensions between Washington and Beijing but is already prompting scrutiny in Brussels.
The agreement, struck in Busan at the end of October, cuts average US tariffs on Chinese goods from about 57 per cent to 47 per cent in exchange for Chinese commitments on fentanyl precursors, rare earth exports and expanded purchases of US agricultural products.
While the deal is limited in scope, it caps several years of tariff escalation that have sharply reduced Chinese access to the US market. US imports from China have fallen markedly since early 2025, alongside an earlier eighteenfold increase in tariffs compared with pre-trade war levels. As US–China trade is reconfigured, analysts note that Chinese exporters are looking more actively to Europe, with the European Union now functioning as China’s largest export destination.
Recent data suggest this reorientation is already visible. According to analysis cited by the Atlantic Council, Chinese exports to the EU rose by about 14 per cent year-on-year in September, the strongest increase in more than three years, pushing the EU’s trade deficit with China close to double its 2018 level. Between 2017 and 2024, China–EU trade increased by roughly $140 billion, with the EU’s annual deficit rising from about $202 billion to $333 billion.
The concern in Brussels is that the Busan truce, while lowering some barriers into the US market, may at the same time accelerate a reshaping of trade flows that channels surplus Chinese production towards Europe. Many Chinese goods still face high and unpredictable tariffs in the United States, as well as regulatory scrutiny in sectors such as technology, defence-related components and critical infrastructure. Producers that find the US market less accessible are likely to seek additional outlets in the EU, where average tariffs on industrial goods remain around 2–3 per cent under WTO rules.
This potential diversion of trade comes on top of longstanding worries about Chinese industrial overcapacity. European industries in sectors including steel, aluminium, machinery, batteries and electric vehicles report intensified competition from low-priced Chinese products, often linked to state support. The EU’s trade deficit with China reached a record €305.8 billion in 2024, and Germany alone is forecast to post an €87 billion bilateral deficit this year, adding to pressure from manufacturers and unions in Europe’s largest economy.
EU policymakers have begun to respond with more active trade defence. Most Chinese exports still enter the EU at low tariff rates, but Brussels has opened a rising number of anti-dumping and anti-subsidy investigations and is imposing duties of 20–50 per cent in sensitive sectors such as green technologies and electric vehicles. Tariffs on China-built EVs have been raised to as much as about 45 per cent following high-profile subsidy probes, while the Commission has also launched cases across a range of industrial products from tinplate to wooden flooring.
At the same time, the EU is tightening rules in areas where Chinese exporters have expanded rapidly. The Commission is working on measures to curb under-taxed small parcels arriving through e-commerce platforms, many of them from China, amid reports of under-invoicing and regulatory gaps. Brussels is also seeking to reduce dependence on Chinese inputs in critical supply chains, particularly rare earths and permanent magnets used in green and digital technologies, even though Beijing’s suspension of new export controls, agreed with Washington, currently provides some relief for European buyers.
The Trump–Xi truce therefore leaves the EU in a complex position. On one hand, a pause in tariff escalation between the world’s two largest economies may reduce global uncertainty and stabilise demand for European exports. On the other, a combination of US protection, Chinese industrial policy and still-open European markets risks turning the EU into the primary outlet for Chinese surplus production. As EU–China ties are already described by Commission President Ursula von der Leyen as being at an “inflection point”, the question for policymakers in Brussels is how far to go in deploying trade-defence instruments and industrial policy to address rising imbalances without provoking further retaliation from Beijing.
