Consumers and businesses in the European Union (EU) are spending significantly more on goods imported from China than Chinese buyers are spending on European products. A recent study by the Mercator Institute for China Studies (Meric) highlights that the EU's trade deficit with China reached more than €1 billion per day in July. This imbalance has become a growing concern, especially after EU Commission President Ursula von der Leyen emphasized the need to address the trade gap. The issue comes amid discussions between China and the U.S., with Chinese President Xi Jinping and U.S. President Donald Trump set to meet in Washington. The trade imbalance is not just about the EU buying more from China, but also about China exporting more to Europe while purchasing less from it. The EU and China are currently engaged in talks to avoid a potential trade war. EU Trade Commissioner Maroš Šefčovič is scheduled to meet his Chinese counterpart in Beijing on October 8, with the widening trade deficit expected to be a central topic of discussion. According to Meric's analysis of Chinese customs data, the EU's trade deficit with China reached €36.5 billion in July alone, up from €32.2 billion in July of the previous year. From January to July, the total deficit now stands at €234 billion, an increase of about €21 billion compared to the same period in 2025. The EU is considering various measures to address the imbalance, including imposing quotas on hybrid vehicles and certain types of chemicals imported from China. The Financial Times reported that the EU has asked China to voluntarily reduce the export of hybrid vehicles, which have seen a significant surge in sales following additional tariffs imposed on all third-country car imports. The latest data shows that sales of hybrid cars not requiring a plug have grown tenfold, from nearly 4,000 vehicles in October 2024 to 50,000 in July 2026. China has warned it is prepared for a trade war but has maintained a diplomatic stance ahead of the October summit. China's commerce ministry stated that any resolution between the EU and China must ensure a balance of interests, comply with World Trade Organization rules, and respect the domestic laws of both sides. Additionally, Chinese exports will be a key topic at the Washington summit, with expectations that a 12-month suspension of Beijing's rare earth export restrictions will be extended. If no extension is announced this week, it may be addressed at the upcoming Asia-Pacific Economic Cooperation (APEC) summit in November. China introduced the rare earth export restrictions in April 2025, which nearly halted the car industry in the EU, Mexico, the U.S., and the UK due to shortages of permanent magnets. The ban was suspended last October during a meeting between Trump and Xi in South Korea, but no further concessions were made during their previous meeting in May.