Europe’s China trade push runs into a hotter reality

The European Union is trying to shrink its goods trade deficit with China, a gap that matters for investors because it shapes tariffs, supply chains and the companies that win European consumer spending. The awkward part: a historic heat wave is pushing more Europeans toward air conditioners, a category where Chinese brands dominate.

After talks in Brussels this week, the European Commission and China issued a joint statement saying they would work on trade balances and market-access concerns. European trade chief Maros Sefcovic said disputes over trade imbalances, export controls and intellectual property should produce “tangible results” by October, after his meeting with Chinese Commerce Minister Wang Wentao.

The two sides also agreed to form a bilateral working group to watch trade flows. Sefcovic said Beijing offered reassurance that current export controls on rare earths and permanent magnets would not disrupt EU supply chains. Rare earths are minerals used in products such as electric vehicles, wind turbines and electronics, while permanent magnets are key components in motors and industrial equipment.

The scale of the gap is large. Eurostat data cited by the European Commission show the EU’s goods deficit with China rose 15% last year to €360 billion, or about $410 billion. All 27 EU countries ran a deficit with China, and the shortfall reached €98 billion in the first quarter, the widest since 2022. Electrical equipment and machinery are among the bloc’s largest import categories from China.

Cooling demand is now adding another pressure point. Europe has historically used less air conditioning than the U.S., partly because heat waves were shorter and because many cities have strict rules on building facades. The International Energy Agency says about 20% of European households have air conditioning, compared with nearly 90% in the U.S.

Chinese appliance maker Midea has become one of the clearest examples of that opening. Securities Times reported that orders for Midea’s PortaSplit unit had exceeded 200,000 this year as of Monday, twice last year’s pace. A German inventory-tracking website built by software developer Adrian Kübel showed Midea units were mostly sold out after gaining attention on social media.

Midea’s product also shows how suppliers are designing around Europe’s rules. The PortaSplit has an outdoor unit that can sit on a window bracket without drilling, and it is classified as furniture rather than a permanent fixture. Its refrigerant charge is 1.99 kilograms, just below France’s 2-kilogram threshold, according to Chinese media outlet 36Kr.

European-owned brands are largely absent from the top of the market. Euromonitor International says China’s Haier, Gree Electric Appliances and Midea together held about 32% of Europe’s air-conditioner retail volume in 2025. Turkey’s Beko and Japan’s Daikin rounded out the five best-selling brands, according to Euromonitor.

Analysts are skeptical that the latest talks will quickly change the trade math. Gabriel Wildau, managing director at Teneo, said concern over China’s pressure on European industry appears to have reached a tipping point, while Beijing has shown limited interest in easing Europe’s concerns. Wildau said he saw no policy action strong enough to materially reduce China’s surplus with Europe.

Alicia García Herrero, chief economist at Natixis, said China had not committed to an import quota or a specific implementation mechanism. Denis Depoux, global managing director at Roland Berger, said half of EU imports from China are technology products, including cars and advanced machinery, a reversal from past decades that he said is concerning for European industry.

The European Commission has already increased pressure on some Chinese-linked supply chains, including restrictions tied to solar projects using Chinese-made components and the end of a tax exemption for low-value parcels used by platforms such as Temu and Shein. Andrew Small, director at the European Council on Foreign Relations, said any EU measures would likely focus on areas with serious harm to critical sectors or dependency risks, including rare earths, chemicals, autos and heavy machinery, rather than broad tariffs.

This story draws on original reporting from CNBC Economy.