Chinese air conditioner exports to the EU hit €3.2 billion in the first half of 2026, a 43% year-on-year jump, as heatwaves swept the continent. The surge illustrates a broader dynamic: EU imports from China are accelerating just as Brussels attempts to narrow a trade deficit that reached €360 billion in 2025 and widened further in early 2026. Only one in five European households owns air conditioning, creating a captive market that Chinese manufacturers are rapidly capturing, with the top three Chinese brands already holding a 32% retail market share by volume.

This export success rests on a production model exemplified by the Zhengzhou factory complexes of Foxconn and BYD. There, 250,000 to 400,000 workers toil in sprawling facilities under long shifts for monthly wages of around €600, with tight political oversight. Such scale—BYD’s plant is already seven times the size of Volkswagen’s Wolfsburg site—gives Chinese firms a cost advantage that European rivals struggle to match. OECD data suggest that large Chinese industries receive nine times more state support than their global peers, contributing to structural overcapacity in sectors from solar panels to electric vehicles; Beijing’s factories now produce roughly double the global demand for solar panels and lithium batteries.

European policymakers face a dilemma. Consumer appetite for affordable Chinese goods—now extending from air conditioners to EVs—undercuts efforts to decarbonise while rebuilding strategic autonomy. A survey of EU countries shows opinion evenly split on whether to forge closer ties with China or the United States. In Spain, Chinese state-owned SAIC is setting up an assembly plant with reported subsidies of 35.5%, raising questions about whether the investment constitutes competition or industrial substitution. Viewed from Berlin and Paris, this competition is increasingly framed as a systemic clash: a “knock-out fight” in which China’s state-capitalist model, with its alleged use of forced labour and suppression of workers’ rights, challenges Europe’s social market economies.

The EU has responded with anti-subsidy tariffs on Chinese electric vehicles and is reviewing other sectors, but the summer’s air conditioner boom illustrates the difficulty. Retaliation risks higher prices for consumers and potential Chinese export controls on critical minerals, as seen in 2025. The next milestone is the EU’s mid-year trade assessment, expected to trigger further trade defence instruments or negotiations. Whether European unity holds amid diverging national interests will shape the bloc’s ability to manage an economic relationship that grows more entrenched with every heatwave.