China reported its largest ever trade surplus with the EU in the first quarter of this year. What stands out is not just the size of the surplus, but how it was generated. The widening gap was driven mainly by a surge in Chinese exports to the EU. The equation is simple: since 2021, China’s exports to the bloc have grown at a compound annual rate of 6%, while its imports from the EU have contracted by 2.5% a year. As a result, the EU alone now accounts for 31% of China’s total goods trade surplus.
China’s exports of electric and hybrid vehicles jumped from $11.0 billion in Q1 2025 to $20.6 billion in Q1 2026. In round numbers, that is a striking 87% surge year on year.
China’s car export boom is no longer mainly a combustion-car story. Almost all the growth now comes from electric and hybrid vehicles. Combustion-car exports are still increasing, but at a much slower pace. The gap widened dramatically in just one year: electric and hybrid exports exceeded combustion-car exports by $2.9 billion in Q1 2025, but by $10.5 billion in Q1 2026. That is a substantial change in the composition of China’s car exports.
Nearly one third of the value of China’s electric and hybrid vehicle exports in Q1 2026 went to the EU. For all the talk of diversification, Europe still stands out as the single most important external market. Add the UK, Norway and Switzerland, and the wider European region accounted for roughly 42% of the total. Shipments to Canada and the U.S. do not even reach 0.6%.
Prompted by a report from journalist Finbarr Bermingham that the EU plans to stop EU funds from going to clean-technology projects containing Chinese inverters, we reviewed the EU import codes. We found that, from 1 January 2026, the EU’s tariff nomenclature gives inverters with maximum power point tracking functionality (MPPT) their own code, CN 8504 40 84.
In January-February 2026, the EU imported more than €220 million worth of MPPT inverters, 95% of them sourced from China. The introduction of a dedicated code from January does not by itself prove a policy move, but it does give the EU a clearer statistical handle on a product category now coming under closer scrutiny.
Since late 2023, China has required export licences for natural graphite in powder or flake form on dual-use grounds. In early 2026, EU imports of natural graphite from China fell 22%, even as imports from the rest of the world rose 1%. China’s share of EU import volumes therefore dropped to 39% in January-February, from 45% in the same period last year.
China still accounts for 93% of the EU’s sourcing of these magnets, while import volumes rose 18% year on year in January-February 2026. Neodymium permanent magnets matter because they are the small, powerful magnets that help make electric cars, wind turbines, robots and many modern electronics lighter, smaller and more efficient.
This looks very much like front-loading. China’s imports of U.S. chips rose from $3.7 billion to $10.0 billion in Q1, a surge too large to read as normal quarterly noise. With the tariff truce only temporary, the broader tech relationship still unstable, and global chip demand still strong, Chinese buyers had every reason to bring purchases forward. By value, imports jumped 168% year on year in Q1.
Belgian customs says the e-commerce surge through Liège Airport is still intensifying. In 2025, it processed 1.3 billion e-commerce declarations, averaging 3.6 million a day, with the daily figure reaching 4.7 million in January 2026. Yet only 0.006% of all declarations were actually checked, and 30% of the B2C declarations inspected were found to be non-compliant. While the Belgian release does not single out China, EU-wide figures show that nine out of ten low-value parcels entering the bloc come from China.
Unlike chips, this does not look like a buying rush. It looks more like a return to normal. U.S. shipments a year earlier were unusually strong because Chinese buyers had rushed to secure soybeans before Trump returned to office and possible trade tensions resumed, while Brazil was temporarily held back by harvest delays. By 2026, Brazil was heading for record production and exports, and regained its usual place in China’s soybean supply.
Even so, the Q1 2026 arrival data suggest that Trump’s February claim of 20 million tonnes for the marketing year may be hard to reach. The U.S. soybean marketing year runs from 1 September to 31 August, but China recorded zero U.S. soybean arrivals in Q4 2025 and only 3.7 million tonnes in Q1 2026. Measured by actual arrivals rather than pledges, China still looks a long way from that target.
The pattern is strongly consistent with the Trump administration’s decision to end de minimis treatment. The U.S. shock appears to account for the entire net decline, while other markets combined failed to offset it. In fact, excluding the EU and the U.S., exports by Chinese e-commerce platforms to the rest of the world rose just 4%, adding barely $0.7 billion over Q1 2025. The Global South, in other words, cannot fully absorb the loss of exports to advanced markets.
China’s crude oil sourcing in Q1 2026 became less concentrated in the Persian Gulf excluding Iran. That supplier group remained by far the largest, but its share fell from 45% to 36%. The main beneficiaries were Russia, whose share rose from 18% to 22%; Iran, via Malaysia and Indonesia, from 14% to 16%; and Brazil, from 6% to 10%. Africa was unchanged at 9%, while the residual “others” category edged down. A Q1 aggregate, however, is too blunt an instrument to be read as clear evidence of a reaction to events that only emerged in March.
For China, the main novelty in the EU’s 20th sanctions package is not that Brussels mentions Chinese actors again, but that it says for the first time a Chinese state-owned entity is being targeted under the Belarus sanctions regime because of its role in the production of Belarusian military goods. The EU is willing to widen pressure on specific Chinese actors when it sees them as part of the wider support structure behind Russia’s war. See next post.
China’s Ministry of Commerce has placed seven EU entities on its export control list, banning them from receiving dual-use items from China. The list includes 2 companies from Belgium, 4 from the Czech Republic and 1 from Germany. In its official explanation, MOFCOM said the entities had been involved in arms sales to Taiwan or in collusion with Taiwan.
By 2027, Airbus could have the next-generation freighter market largely to itself. The A350F is expected to enter service that year, while Boeing’s rival 777-8 Freighter looks more like a 2029 story. China has no comparable domestic widebody freighter close to service. Airbus is also pitching the A350F as a new-generation freighter aligned with the tougher international aviation CO₂ rules due in 2027.