Europe wants to rebalance trade with Beijing, but can't quit Chinese air conditioners

Europe wants to narrow its record trade deficit with China by October, but the bloc's worst-ever heat wave is driving unprecedented demand for imports of Chinese-made air conditioners, a telling tale illustrating how hard it will be for Brussels to address the trade imbalance.

The European Union and China released a rare joint statement on Monday aimed at balancing trade between the two economies and addressing market access issues.

Disputes over trade imbalances, export controls and intellectual property must deliver "tangible results" by October, European trade chief Maros Sefcovic told reporters after meeting with China's Commerce Minister Wang Wentao. The two sides agreed to set up a bilateral working group to monitor trade flows, with "reassurance" from Beijing that existing export controls on rare earths and permanent magnets will not disrupt EU supply chains.

"Not everything will be solved, not everything will be fixed, but we think that between now and October, our teams have sufficient time to deliver the tangible results," Sefcovic said. Chinese exports to the EU "keep rising, while our market share in China keeps shrinking," he said, calling the trend "not sustainable."

Beijing has made it clear that it would not hesitate to retaliate against any new trade curbs designed to tackle the overcapacity issue.

But the timing is awkward. The pair met in Brussels just as an historic heat wave has Europeans rushing to buy air conditioners — mostly made in China. Europe has long resisted air conditioning as noisy, an eyesore on architectural facades and unnecessary, as brutal summer heat has been relatively short-lived. It also fears widespread adoption of the energy-hungry technology risks undermining the fight against climate change.

The bloc's goods deficit with China grew 15% to €360 billion ($410 billion) last year, with all 27 member states experiencing a shortfall, and expanded to €98 billion in the first quarter, the highest since 2022. Electrical equipment and machines are among the most imported goods.

"The sense of urgency over [China's] threat to European industry appears to have reached a tipping point," said Gabriel Wildau, managing director at consultancy Teneo, while China's leadership has shown "little appetite for placating Europe."

"There is no sign of policy action forceful enough to materially reduce the trade surplus with Europe," Wildau noted.

Air conditioners are adding to that imbalance this summer.

Midea Group reportedly said orders for its PortaSplit unit — a portable split system engineered for Western Europe's fragmented building rules — have topped 200,000 this year as of Monday, double 2025's pace.

A website built by German software developer Adrian Kübel to track real-time inventory of Midea units across the country went viral on social media and showed the air conditioners were mostly out of stock.

Air-conditioning ownership in Europe stands at around 20% of households, far below the nearly 90% penetration rate in the U.S., according to the International Energy Agency, a gap Midea and Asian home appliance makers Samsung and Mitsubishi Electric are all racing to close.

None of Europe's five best-selling air-conditioner brands is owned in the EU. Haier Group, Gree Electric Appliances Inc. of Zhuhai and Midea Group Co. — all Chinese — together hold about 32% of the European market by retail volume in 2025, according to Euromonitor International. Turkey's Beko Corp. and Japan's Daikin Industries Ltd. round out the top five.

Midea's air-conditioning design illustrates the kind of engineering tailored to crack Europe's fragmented and layered regulatory and market barriers.

PortaSplit's outdoor unit clips onto a window bracket, needs no drilling, and is classified as furniture rather than a fixture — sidestepping facade-modification bans in cities like Paris. Its refrigerant charge is also capped at 1.99 kilograms, just under France's 2-kilogram limit.

The absence of a homegrown European name among leading air-conditioning suppliers underscores the industrial gap that EU leaders are trying to address.

Half of the EU's imports from China are technology products, from cars to sophisticated machinery, said Denis Depoux, global managing director at Roland Berger. "This is an inversion of the past decades and is scary for European industries, and can be a financial systemic problem for the Union," Depoux said. He acknowledged the joint statement as positive progress, as "it is the first one in several years."

The soaring demand for Chinese-made cooling technology also reflects an economic reality underlying analysts' skepticism that Beijing has conceded much in trade talks, as Brussels struggles to boost its own exports.

"China has made no real commitment in setting an actual [import] quota or actual implementation mechanism," said Alicia García Herrero, chief economist at French investment bank Natixis, calling the progress simply "smoke" from China to deter Europe from launching more protectionist measures.

European leaders are balancing consumers' desire for cheaper Chinese household goods, such as air conditioners, and maintaining their industrial inputs in strategic categories and employment.

The European Commission, which has long criticized the excessive subsidies Beijing uses to support its companies and has alleged it dumps cheap goods in the bloc, said after talks on Monday that "the status quo is not an option." The bloc has recently turned up the heat on Chinese companies operating in Europe, including restricting funding to solar projects using Chinese-made components and ending a tax exemption for low-value parcels used by companies like Temu and Shein.

"Any measures would be targeted in areas where either Chinese competition risks causing serious harm to critical industrial sectors, or where there is a major dependency risk that China may weaponize," said Andrew Small, director at the European Council on Foreign Relations, with a particular focus on rare earths, chemicals, autos and heavy machinery.

"There is no discussion about across-the-board tariffs," he added.

For business in Europe, trade negotiations carry existential consequences.

"Europe, too, needs a common understanding to avoid escalation of tit-for-tat responses," Depoux said.

"'Delayed reciprocity' is the concept that should be at play here" — one that could eventually see Chinese and European firms merge to compete globally rather than clash over market share, he added.