EU-China trade tensions collide with air conditioner boom

Europe wants to narrow its record trade deficit with China by October, but the worst heatwave in the region’s history has led to an unprecedented increase in demand for imported Chinese air conditioners, underscoring how difficult it will be for Brussels to address the trade imbalance.

The European Union and China issued an unusual joint statement on Monday aimed at balancing trade and addressing market access issues between the two economies.

European Trade Representative Maros Sefcovic told reporters after a meeting with Chinese Minister of Commerce Wang Wentao that disputes over trade imbalances, export controls and intellectual property must yield “concrete results” by October. The two countries agreed to set up a bilateral working group to monitor trade flows, with Beijing’s “reassurances” that existing export controls on rare earths and permanent magnets will not disrupt EU supply chains.

“It’s not going to solve everything, it’s not going to fix everything, but I think the team has enough time between now and October to deliver tangible results,” Sefcovic said. He said that while China’s exports to the EU “continue to increase, our market share in China continues to shrink”, calling the trend “unsustainable”.

The Chinese government has vowed it will not hesitate to retaliate against new trade restrictions to tackle overcapacity.

But the timing is difficult. The two met in Brussels during a historic heatwave that sent Europeans scrambling to buy air conditioners, mostly made in China. In Europe, air conditioning has long been resisted as noisy, unsightly on building facades, and unnecessary due to relatively short periods of intense summer heat. They also worry that widespread adoption of energy-intensive technologies risks undermining the fight against climate change.

The trade deficit with China rose 15% last year to 360 billion euros ($410 billion), leaving all 27 member countries in shortfall, and widened to 98 billion euros in the first quarter, the highest since 2022. Electrical equipment and machinery are the most imported items.

“The sense of urgency about (China’s) threat to European industry seems to have reached a tipping point,” said Gabriel Wildow, managing director at consultancy Teneo, adding that Chinese leaders “have little appetite to appease Europe.”

“There is no sign of policy measures strong enough to significantly reduce the trade surplus with Europe,” Wildau said.

This summer, air conditioners are adding to that imbalance.

aesthetic group Orders for the company’s PortaSplit units, a portable splitting system designed to meet Western Europe’s subdivided building codes, have exceeded 200,000 this year as of Monday, double the pace of 2025, according to reports.

Real-time inventory tracking website built by German software developer Adrian Kübel Midea Air conditioners across the country went viral on social media, and it was discovered that most of the air conditioners were out of stock.

According to the International Energy Agency, the ownership rate of air conditioners in Europe is about 20% of households, much lower than the nearly 90% penetration rate in the United States, and there is a gap between Midea and Asian home appliance manufacturers. samsung and Mitsubishi Electric Everyone is racing to close.

None of Europe’s five best-selling air conditioner brands are owned in the EU. haier group, Gree Electric Co., Ltd.. Companies from Zhuhai and Midea Group, both Chinese, will account for about 32% of the European market by retail volume in 2025, according to Euromonitor International. Türkiye’s Beko Corp. and Japan’s Daikin Industries, Ltd. Rounding out the top five.

Midea’s air conditioning design exemplifies engineering tailored to break through Europe’s fragmented and layered regulatory and market barriers.

PortaSplit’s outdoor units clip onto window brackets, require no drilling, and are classified as furniture rather than fixtures, circumventing facade modification bans in cities like Paris. Refrigerant usage is also limited to 1.99 kilograms, slightly below the French limit of 2 kilograms.

The absence of Europe’s homegrown names among major air-conditioning suppliers highlights the industrial disparity that EU leaders are trying to address.

Roland Berger global managing director Denis Despoux said half of the EU’s imports from China are technology products, from cars to advanced machinery. “This is a reversal of the past few decades, which is frightening for European industry and could represent a financial systemic problem for the European Union,” Depou said. He acknowledged the joint statement as a positive development, saying, “This is the first joint statement in several years.”

The surge in demand for Chinese cooling technology also reflects economic realities underlying analysts’ skepticism that Beijing has made too many concessions in trade talks as Brussels struggles to boost its own exports.

“China has not made any commitment to setting up actual (import) quotas or actual implementation mechanisms,” said Alicia García Herrero, chief economist at French investment bank Natixis, adding that the development was just “smoke” from China to deter Europe from taking further protectionist measures.

European leaders are balancing consumer desire for cheap Chinese-made household goods such as air conditioners with maintaining industrial input in strategic categories and jobs.

The European Commission, which has long criticized Beijing’s use of excessive subsidies to support its own companies and accused it of dumping cheap goods into the region, said after Monday’s talks that “maintaining the status quo is not an option.” The European Union has recently stepped up attacks on Chinese companies operating in Europe, including restricting funding for solar power projects that use Chinese-made components and ending tax exemptions for low-cost plots used by companies such as Tem and Shein.

Andrew Small, director of the European Council on Foreign Relations, said: “Any measures would be targeted at areas where Chinese competition risks serious damage to key industrial sectors, or where there is a significant risk of dependence that China could weaponize, with a particular focus on rare earths, chemicals, cars and heavy machinery.”

“There is no discussion about flat tariffs,” he added.

For European businesses, trade negotiations have existential implications.

“Europe also needs a common understanding to avoid an escalation of retaliatory responses,” Depou said.

“‘Deferred reciprocity’ is a concept that should be utilized here,” he added. He added that this could ultimately lead to Chinese and European companies merging to compete globally rather than clashing over market share.