Euro Area Fears China's Record Trade Surplus

China's rapid integration into global trade triggered the first 'China Shock' in the early days of globalization, reshaping trade flows and labor markets across partner economies. Now, a new wave appears to be underway: since the pandemic, Chinese goods exports have surged while imports have stagnated, driving China's merchandise trade surplus to record levels in 2025.

This 'China Shock 2.0' reflects gains in price competitiveness and technological upgrading, partly supported by industrial policies. For the euro area, the shock brings disinflationary pressures, stronger import competition, and renewed concerns over external dependencies.