Should the EU pursue closer relations with China? Lorenzo Codogno argues that rather than being led by national security concerns, the EU and China should build a pragmatic trade relationship and commit to maintaining an open global trade and investment environment.
The world economy has faced numerous shocks over the past six years. First was the COVID-19 pandemic. Then, a sharp rise in gas prices related to the invasion of Ukraine affected mainly Europe. Last year, US President Trump triggered a global trade war by imposing tariffs on all countries. Finally, the US and Israel’s attack on Iran sparked another energy shock, this time truly global.
These crises have underlined that the EU continues to face considerable vulnerability to energy shocks. While aiming to reduce dependence on fossil fuels to protect the environment, the EU still requires affordable baseload energy to support industrial activities and other continuous consumption needs.
It is a leader in climate transition and renewables, with 47.3% of electricity generated in the EU from renewable sources in 2025. Yet, it still struggles with limited internal cross-border connections and a fragmented internal energy market. Nearly 60% of the EU’s energy requirements are met through imports, worth €337 billion (1.9% of GDP).
EU-China relations
China faces a similar situation, making both regions dependent on energy security for their economic prosperity, and therefore on trade. China and the EU are the two major global trading blocs, with large export sectors and trade surpluses.
The EU has persistently run excessively high trade and current account surpluses and has not invested sufficiently in its own economy. China has financed its capital investment needs by boosting exports at the expense of household consumption.
The EU and member countries’ stance has shifted since the pandemic, with the launch of sizeable public investment programmes, including recent efforts to make their security and defence sectors more competitive. This has apparently started to show some results, with savings increasingly channelled towards domestic investment, rebalancing the position towards the rest of the world.
The Eurozone current account surplus narrowed significantly to €255 billion (1.6% of GDP) in 2025, from the €407 billion (2.7% of GDP) surplus recorded in 2024. The EU’s trade surplus in goods declined to €128 billion in 2025, compared to €136 billion in 2024.
Focusing only on bilateral trade positions rather than each area’s overall external balance is misleading. In an open, rule-based global trading system, countries exchange goods and services to achieve the most efficient allocation of resources on a global scale, and in this context, interdependence is beneficial.
Unfortunately, the world is not a level playing field; it is divided along geopolitical lines, with many trade tensions. Thus, the emphasis is increasingly on bilateral trade balances, and economic security prevails over efficiency and open trade.
Gone are the days when global trade benefited consumers in developed countries by providing access to affordable products while enabling developing countries to grow and progress.
Today, major technology firms seek global dominance, aiming to achieve near-monopoly power. It is true for the US’s big tech companies as well as China’s state-owned enterprises. This struggle for technological supremacy sparks conflicts that can only be managed through fair and rule-based governance.
Global institutions like the United Nations (UN) or the World Trade Organization (WTO) still play a fundamental role, but there is no doubt they are facing a deep crisis. Therefore, it is necessary to explore new approaches, preferably multilateral but without ruling out bilateral progress.
The Trump effect
EU countries have long-standing historical ties with the United States, and these ties are unlikely to change. However, the recent confrontational stance of the US Administration towards traditional EU partners has somewhat dented the relationship.
The US Administration is telling Europe that it must take responsibility for its security and defence, which is understandable. Europe has generally relied on the US’s protective umbrella, and this approach is no longer acceptable on either side of the Atlantic. It also had implications for EU-US bilateral trade and investment, with the EU being forced to accept a unilateral flat tariff and other concessions.
Despite Trump’s tariffs, EU-US trade in goods reached an impressive €909 billion in 2025 (€553 billion in exports, €356 billion in imports, with an EU trade surplus of €198 billion, i.e. 1.1% of the EU’s GDP). The combined position in goods and services is far more balanced (an EU surplus of less than 0.5% of GDP).
With China, however, the situation is clearly unbalanced. Total bilateral trade in goods between the EU and China reached €759 billion in 2025. The EU exported €200 billion of goods to China, while importing €559 billion, resulting in a trade deficit of €359 billion, i.e. 2% of the EU’s GDP.
This partly reflects China’s role as the global industrial producer, with industry accounting for about 37% of gross value added, compared with 22% in the EU and about 18% in the US. The imbalance would not be a problem in an open trade system, free of geopolitical divisions and fragmentation.
The case for a more pragmatic relationship
It is very encouraging that China has taken a constructive stance in this regard. An excerpt from the outline of China’s Five-Year Plan for national economic and social development states:
“China will remain committed to open cooperation and mutual benefit, steadily expanding institutional openness and building a higher-level open economic system. It aims to promote high-quality development of the Belt and Road Initiative, enhance international circulation, and leverage openness to drive reform and development. China advocates for an equitable and orderly multipolar world and inclusive, beneficial economic globalisation, sharing opportunities and fostering common development with countries around the globe.”
The positive effects of China’s high-level opening-up on the global economy make existing problems more manageable. This statement can be subscribed to word-for-word, but deeds need to follow words.
Unlike the most recent US Administration’s unpredictable stance, China has consistently pursued a long-term policy approach in its relations with other countries and blocs. This is appropriate as businesses need a stable, predictable environment to establish long-lasting relationships.
China and the EU can resist protectionist pressures by balancing resilience, autonomy, and openness. They should pragmatically strengthen economic and trade cooperation to jointly uphold an open global trade and investment environment, ensuring mutual benefits and win-win outcomes.
The time is now ripe to reconsider global economic governance through a multilateral approach grounded in shared, respected rules, international law, peaceful coexistence and free trade.
If national security becomes – as it has de facto already become – an overriding consideration, international relations would be based on non-transparent (as national security is by definition non-transparent), subjective (as designing rule-based governance based on national security consideration would be close to impossible), and unpredictable developments, which would be a good recipe for heightened conflicts.
Note: This article gives the views of the author, not the position of LSE European Politics or the London School of Economics.
Image credit: European Union
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