A quick note before today’s issue. SOAPBOX will take a summer break after this edition and return on 24 August with fresh, comprehensive coverage of what EU trade with China looked like in the first half of 2026.
For decades, the direction of automotive trade between Germany and China was obvious. Germany sold; China bought. In 2026, that relationship is set to reverse.
China’s vehicle imports from Germany have fallen from US$17.2bn in 2022 to an annualised US$5.0bn, while Chinese exports to Germany have risen from US$1.3bn to US$6.3bn. The bilateral balance has swung by roughly US$17bn in four years.
This is more than a crossover in two trade lines. It marks a reversal in one of the defining industrial relationships between Europe and China.
The reversal in China’s automotive trade is not confined to Germany. Bratislava is one of Volkswagen Group’s major European manufacturing hubs, producing Volkswagen, Audi, Porsche and Škoda models. China’s vehicle imports from Slovakia have fallen by roughly three quarters since 2022, while exports in the opposite direction have increased almost fivefold. On SOAPBOX’s annualised estimate, the bilateral automotive gap has almost disappeared.
China’s exports of electric and hybrid cars to the EU more than doubled to US$14.2bn in the first half of 2026. Electric-car exports increased 52% to US$6.7bn, but hybrid exports surged 206% to US$7.5bn.
The result is a striking reversal in the mix. Electric cars fell from 64% to 47% of the combined export value, while hybrids rose from 36% to 53%. EU countervailing duties currently apply to battery-electric vehicles from China, not to plug-in or conventional hybrids. The tariff effect is therefore difficult to ignore.
Within hybrid exports to the EU, plug-in models accounted for roughly twice the value of non-plug-in hybrids, compared with a three-to-one ratio across China’s worldwide exports. Europe nevertheless remains central to both categories. It absorbed 29% of China’s electric-car exports and 31% of its hybrid exports by value, equivalent to 30% of their combined global total.
The EU has not reduced the flow of Chinese electrified cars. It has changed the composition of that flow. If hybrids continue expanding at this speed, Brussels may eventually conclude that the current tariff has shifted the problem rather than resolved it, raising the possibility of a separate investigation into Chinese hybrids.
The timing is particularly awkward. These are China Customs export figures, so part of the recent surge may not yet have appeared in EU import statistics. The next European data could therefore show further deterioration precisely while the EU and China are trying to produce tangible results by October on trade rebalancing. Commissioner Šefčovič has already said that rising Chinese exports and Europe’s shrinking position in China are unsustainable. These vehicle figures will make that negotiation harder, not easier.
We remain sceptical that the talks will reverse the direction of the numbers by October.
Electric cars still accounted for the largest share of China’s car exports by value in the first half of 2026. But only just. Their share fell from 59% to 51% in a year, while hybrids climbed from 41% to 49%, leaving a gap of just US$1bn.
The shift reflects much faster growth in hybrid exports. Their export value more than doubled (+115% YoY), compared with +57% for electric cars. Within hybrids, plug-in models continued to strengthen, accounting for roughly three quarters of hybrid export value, up from a ratio of 2.7 to 1 a year earlier.
Electric cars remain China’s largest automotive export category. But the balance is changing rapidly.
We reviewed China’s national plans, technology roadmaps and the strategies published by major carmakers around 2018–2020. The record does not support the idea that China placed a blind, exclusive bet on battery-electric cars. Chinese planners expected massive hybridisation, while some manufacturers explicitly anticipated that hybrids would outsell battery-electric models within their own sales mix.
What they do not appear to have anticipated was either the speed of the export shift or the configuration that emerged. China’s public roadmaps leaned towards non-plug-in hybrids, yet overseas demand has produced a hybrid export market in which plug-ins now dominate by roughly three to one in value.
As often happens in trade, industrial policy can shape supply, but markets and geopolitics still determine which part of that supply gains traction.
China’s petrol-motorcycle exports to the EU rose 25% by value in the first half of 2026. But the expansion was overwhelmingly driven by larger bikes. Motorcycles above 250cc accounted for 63% of export value and more than four-fifths of the increase, while exports of the smallest models declined. China’s European motorcycle business is no longer mainly a low-cost scooter story.
The scale is no longer negligible. Annualising the first-half figure points to roughly US$1.65bn in 2026 exports to the EU, measured at China’s FOB export value. The eventual value at the EU border and in European retail markets will be substantially higher once freight, insurance, distribution margins and taxes are added.
China’s lithium-ion battery exports to the EU are accelerating again. Shipments reached US$19.9 billion in H1 2026, up US$6.6 billion year on year. That is a 50% increase by value. Unless trade slows sharply in the second half, 2026 will become another record year, underlining EU’s growing dependence on Chinese battery supply.
China’s GDP growth slowed from 5.3% in H1 2025 to 4.7% in H1 2026. As net exports contributed less than half as much as a year earlier, growth leaned more heavily on investment, a component strongly shaped by state policy in China. Consumption, meanwhile, speaks for itself.
MERICS experts have also analyzed China’s economic data for the second quarter of this year. Read more in the MERICS China Economic Indicators.
The European Commission has imposed a €550 million fine on AliExpress for breaching its obligations to diligently assess and mitigate risks relating to the sale of illegal, unsafe or counterfeit products on its e-commerce platform.
AliExpress does not disclose its EU sales. We estimate that goods worth around €60 million are sold through the platform in the EU each day, making the €550 million fine equivalent to roughly nine days of sales, although that figure represents the value of goods sold rather than AliExpress’s own revenue or profit.
China has formally expressed strong dissatisfaction and serious concern over the EU fine, describing it as a digital trade barrier imposed under the guise of platform regulation and as a discriminatory measure aimed at restricting the normal operations of Chinese e-commerce companies.
Rather than showing the expected fall, the June data may capture a final acceleration before the new EU parcel duty took effect on 1 July. Exports were nearly 15% higher than in May and 28% above the January–May monthly average. Whether the parcel channel has genuinely begun to contract will become clear only in the July and August figures.
China’s ship exports to the EU reached US$5.2 billion in the first half of 2026, up 71% from a year earlier. Malta was the largest recorded destination, followed by Germany, Cyprus, Italy and Denmark, although the country breakdown may partly reflect ship ownership, financing and registration structures rather than where the vessels will operate.
Kerosene was the refined product most visibly affected by the Hormuz disruption. Shipments fell by almost half from their January and February levels and remained subdued through June, suggesting that jet fuel was the refined product most affected by the shock, as China appears to have constrained exports to safeguard domestic supply.
Diesel exports proved far more resilient. Although volumes dipped sharply in April, they recovered in the following months, indicating that China broadly maintained diesel exports despite the disruption to Gulf crude flows.
Fuel oil tells the opposite story. After a weak start to the year, exports surged to a six-month high in June, suggesting that Chinese refiners redirected output towards marine fuels as global shipping adjusted to the Hormuz disruption.
After Hormuz, Beijing treated the three fuels differently. Kerosene exports stayed depressed as China restricted ordinary jet-fuel shipments to protect domestic supply. Diesel collapsed in April but then partly recovered as limited exemptions resumed and weak domestic demand left inventories available. Fuel oil moved in the opposite direction because most exports are marine bunker fuel, which was exempt from the restrictions, competitive Chinese prices then drove a June surge.
European producers say Chinese citric acid reaches the EU at prices they cannot match. The Financial Timesfocused on Citribel, one of Europe’s two remaining producers. Its chief executive said Chinese citric acid sells in Europe for about €1,000 per tonne, around 40–50% below his production cost.
SOAPBOX checked the €1,000 figure. Based on China Customs data, reasonable freight and insurance costs, and the applicable EU duties, we estimate a landed price before VAT of:
€901 per tonne at the lowest duty rate
€1,062 per tonne using a central rate
€1,104 per tonne at the highest rate
So far, the claim checks out.
Our calculation cannot establish why Chinese producers can export at that price. It may reflect scale, lower costs, state support or a combination of these factors.
But there is a paradox. China could almost respond to complaints about “cheap” citric acid by saying: you are not even getting our cheapest price.
The EU is China’s largest market for citric acid by far. Yet in the first half of 2026, China sold it to India, its second-largest market, at a price 9% below the EU price. Russia, the third-largest market, paid 12% less.
The point is not that Europe is receiving a special low price. It is that a price the EU industry already considers impossibly low is still not China’s lowest. With China, cheap is often not the floor.
Before the invasion, Russia traded almost twice as much with the EU as with China. Our 2026 estimate reverses that relationship. China–Russia trade is now on course to exceed EU–Russia trade by more than five to one. Yet Russia’s combined trade with the EU and China remains around one fifth below its 2021 level.
Russia has exchanged a large, wealthy and nearby market for far greater dependence on a single partner with stronger bargaining power. Moscow gained a lifeline. Beijing gained leverage.
