EU-China trade: energy, Europe’s weak link

The trade dispute between the European Union and China is no longer merely an accounting imbalance. It raises a more material question: can Europe become industrial again with energy costlier than that of its competitors, critical materials still imported and market rules designed for a more stable and less geopolitical environment?

On June 29, 2026, in Brussels, EU trade commissioner Maroš Šefčovič met Chinese commerce minister Wang Wentao. According to Reuters, the EU wants tangible results by October in consultations covering trade rebalancing, export controls, intellectual property and World Trade Organization reform. The European Commission also issued a joint statement confirming the aim of strengthening ministerial-level dialogue under the Trade and Investment Consultations.

The dominant figure remains substantial: China’s trade surplus with the EU reached about €360.6 billion in 2025, roughly 15% higher than in 2024, and rose by another 10% in the first four months of 2026, according to Reuters. A deficit is not, by itself, proof of strategic dependence: it may reflect consumer choices, integrated value chains or competitiveness gaps. But when it touches critical sectors — batteries, steel, components, magnets, rare earths, e-commerce platforms — it becomes a political fact.

One file, several narratives

Reuters treats the sequence as a negotiation with a tight calendar: deficit, working groups, rare earths and the October deadline. The Guardian stresses the phrase “China Shock 2.0”, used to describe renewed Chinese pressure on European industries. Le Monde observes a Europe hardening its instruments, but slowly. Al Jazeera places the issue inside a broader fear of deindustrialisation. Chinese sources, notably China’s Ministry of Commerce, People’s Daily and Global Times, prefer the vocabulary of stability, consultation, market access and smooth industrial chains.

The lexical contrast almost sums up the dispute: deficit, defence and overcapacity on the European side; stability, dialogue and protectionism on the Chinese side. Brussels wants to reduce a vulnerability that has become visible; Beijing wants to prevent its surpluses from being turned into a systemic accusation.

European alternatives exist, but remain slow

The EU is not merely negotiating with Beijing. It is also trying to build alternatives. The Critical Raw Materials Act sets three 2030 benchmarks: at least 10% of annual EU consumption from extraction inside the EU, 40% of processing in Europe and 25% from recycling. In March 2025, the Commission selected 47 strategic projects in 13 member states, covering lithium, nickel, cobalt, graphite, manganese, rare earths, extraction, processing and recycling.

The Clean Industrial Deal, presented in February 2025, extends this logic: support clean technologies, protect energy-intensive industries and mobilise financing. Reuters reported that the Commission wanted to mobilise about €100 billion for EU-made clean technologies. The intention is clear; execution is less so: fast permits, reinforced grids, patient capital, guaranteed demand and competitive energy.

This is the decisive point in relation to China. According to the International Energy Agency, the electricity-price indicator for EU energy-intensive industries remained, in 2025, more than twice the US level and almost 50% above that observed in China. This gap does not explain all industrial competitiveness, but it directly affects steel, chemicals, aluminium, batteries, hydrogen and low-carbon equipment. Taxing Chinese imports may protect a market; it does not automatically make a European factory profitable.

Russia, or the relocation of dependence

The energy break with Russia is often presented in Brussels as a security gain. The formula needs precision. According to the European Commission, Russia’s share of EU gas imports fell from about 45% before the war to 12% in 2025. Russian oil imports also fell sharply, and the EU plans to end Russian gas imports by 2027. Politically, the Union has therefore reduced its exposure to Moscow.

But it has not eliminated energy dependence; it has changed its geography. According to ACER, the EU imported a record 146 billion cubic metres of LNG in 2025, 58% of it supplied by the United States. This shift offers more flexibility than a pipeline, but exposes Europe more directly to global LNG prices, Asian demand competition and Washington’s political cycles.

Russia carried its own strategic risks, especially visible after 2022. Yet Europe’s energy history requires nuance: the Soviet Union and then Russia were long regarded in Western Europe as contractually reliable suppliers, including during the Cold War. That view was not shared everywhere. The Russia-Ukraine gas transit crises of 2006 and 2009 had already damaged this confidence in Central and Eastern Europe, before the 2022 war made dependence politically indefensible at EU level.

Nord Stream 2 captures that reversal. Gazprom was the project’s sole shareholder, but five European companies — Engie, OMV, Shell, Uniper and Wintershall — had agreed in 2017 to finance 50% of a pipeline estimated at €9.5 billion. Engie, on the French side, was to contribute up to €950 million. Presented by its promoters as a security-of-supply infrastructure, the project became after 2022 the opposite symbol: a dependence that could no longer be politically assumed.

The French paradox of marginal pricing

France makes the contradiction especially visible. The country produces a large share of its electricity from nuclear power. RTE reported that French low-carbon generation, nuclear and renewable combined, reached 521.1 TWh in 2025, or 95.2% of electricity produced in mainland France. Yet European wholesale markets still rely largely on marginal pricing: in the short term, the price is often set by the last plant needed to meet demand, frequently a gas-fired plant when the system is tight.

The mechanism has a logic: dispatch generation by cost order, ease cross-border exchanges and signal scarcity. Final bills also depend on contracts, taxes, networks, national schemes and hedging. But when gas frequently sets the marginal price, it influences expectations, contracts and part of industrial costs.

The EU electricity market reform adopted in 2024 did not abolish this system. It added buffers: long-term contracts, contracts for difference, stronger consumer protection and support for low-carbon investment. This is a correction, not a rupture. For French industry, a national nuclear advantage can therefore be partly diluted in a continental market where the most expensive marginal energy source weighs on the price signal.

Defensive measures and material limits

Since July 1, 2026, the EU has also applied more concrete measures: a temporary €3 duty on low-value parcels imported from outside the bloc, especially through e-commerce, and tougher steel rules. AP News reports that 5.9 billion small packages entered the EU in 2025, compared with about 1.4 billion in 2022. The same outlet attributes to the Commission the estimate that Chinese companies overwhelmingly dominate this segment. On steel, new European quotas limit tariff-free volumes and impose a 50% duty above quota on 26 categories.

These instruments respond to real problems, but they do not replace a production policy. A parcel duty can reduce a customs advantage; it does not rebuild a manufacturing base. Steel quotas can slow some flows; they do not automatically offset electricity prices, scale gaps, global overcapacity or slow investment. Critical-material projects can secure supply chains; they will matter only if they become locally accepted, financed and operational within timeframes compatible with Chinese competition.

The European paradox therefore lies in an unstable trade-off: seeking to depend less on China and Russia, while importing more global LNG and keeping pricing rules that can dilute some national advantages, such as French nuclear power.

It would be excessive to reduce this situation to ideological incoherence; it would be equally excessive to see it as a fully controlled strategy. Europe is arbitrating between dependencies, each with its own cost, narrative and risk. Facing China, the question is therefore not only whether the EU can reduce a deficit. It is whether it can rebuild the material conditions of industrial power: competitive energy, secure critical materials, fast investment, deep markets and procedures quick enough to match the pace of industrial and geopolitical crises.

FAQ

Is the EU really building alternatives to China?

Yes. The Critical Raw Materials Act, the 47 European strategic projects and the Clean Industrial Deal aim to strengthen extraction, processing, recycling, clean technologies and local production. Their effect will depend on permits, financing, energy and industrial timelines.

Does exiting Russian gas make Europe independent?

No. It reduces political exposure to Moscow, but increases exposure to global LNG, especially from the United States. Europe gains relative diversification, not full autonomy.

Why does France not fully benefit from its nuclear power?

Because the European wholesale market still relies largely on marginal pricing. Final prices also depend on contracts and taxes, but when gas sets the marginal price, it influences part of industrial costs.