EU Trade: Chinese Dominance and Russian Isolation

The last decade has been marked by continuous growth in trade exchange between the European Union and the People’s Republic of China, despite customs barriers. Nevertheless, the EU remains China’s largest trading partner, while China, in terms of trade volume, is the second most important partner for the EU. Germany, the Netherlands, and Italy play a key role in bilateral trade as the largest exporters and importers of goods between the two markets.

Regarding Croatia’s trade exchange with China, a 9.2 percent increase was recorded in the first half of 2024 compared to the same period last year, while data on trade exchange with Russia in 2023 shows that exports to Russia increased, while imports from that country significantly decreased. The total trade exchange of Croatia with BRICS countries, including Russia and China, accounted for just over 3 percent of Croatia’s total foreign trade balance in 2023, while fresh data for 2024 is yet to come.

But let’s return to the EU. More than half of the EU’s imports from China consist of mechanical devices and electrical equipment. Vehicles and aircraft account for less than 6 percent of the share, while organic chemical products make up 4.7 percent, and clothing accessories 4.5 percent. On the other hand, more than a third of the EU’s exports to China also consist of mechanical devices and electrical equipment, while vehicles and aircraft account for 16.7 percent, pharmaceutical products 9.3 percent, and optical instruments 7.2 percent.

Growth of the Chinese Automotive Industry and EU Tariff Measures

Chinese car manufacturer BYD achieved record sales of hybrid and electric vehicles during 2024, driven by strong domestic demand and successful state programs for replacing old vehicles. Sales of purely electric vehicles increased by 12.08 percent compared to 2023, reaching a total of 1.76 million vehicles.

At the end of 2024, the EU imposed tariffs on Chinese electric vehicles due to the conclusion that state subsidies enable Chinese manufacturers to dump prices in the European market. China criticized these measures as protectionist, responding by launching an anti-dumping investigation into dairy products from the EU, which could result in tariffs on the import of cheese and milk.

EU Trade with Russia: Significant Decline in Imports and Exports

The European Union has significantly reduced its dependence on Russia in trade relations, with exports to Russia and imports from that country recording a decline of 58 percent and 86 percent, respectively, since the beginning of the invasion of Ukraine in 2022. The largest declines in imports were recorded for nickel and oil.

Eurostat data shows that the EU’s trade deficit with Russia fell to just 0.6 billion euros in the third quarter of 2024, a drastic decline from a peak of 46 billion euros in the second quarter of 2022. The EU has further reduced its dependence on Russian energy and resources by introducing trade restrictions on several key products.

To compensate for the decline in imports from Russia, the EU has increased nickel procurement from the USA, Norway, and the United Kingdom and replaced Russian oil with imports from the USA, Kazakhstan, Norway, and Saudi Arabia. However, imports of fertilizers from Russia increased by 13 percentage points, while shares of natural gas, iron, and steel recorded a slight increase. To reduce dependence on Russia, the EU has launched initiatives such as the REPowerEU plan and signed new energy agreements. Among them is the expansion of the Southern Gas Corridor to diversify energy sources. However, a Chatham House report suggests that Russia continues to find ways to supply the European market, including ‘washing’ Russian gas through Azerbaijan and Turkey. However, the European Commission rejects claims that agreements with Azerbaijan allow for the indirect return of Russian gas to the European market, despite the fact that parts of the gas transport infrastructure are owned by the Russian company Lukoil, which is under US sanctions.