For decades, Europe was one of the great defenders of an open world economy, based on free trade and competition. But the world has changed. A recent Citi study describes a European Union squeezed between a more protectionist United States and a China with enormous industrial capacity seeking external markets. In 2025, the EU imported about 560 billion euros from China and exported only 199 billion, a deficit of 361 billion. The question is inevitable: how can Europe preserve its free trade identity in the face of these new rules of the game?
A first reflection is that free trade presupposes some degree of reciprocity. China has built a powerful industrial policy, combining scale, financing and public support, while the United States increasingly conditions incentives and market access on domestic production. Europe risks continuing to operate under rules that its main competitors no longer follow. Economic openness ceases to be an advantage when it is essentially unilateral.
Then, greater protection does not mean ending trade relations. Batteries, rare earths, electronic components, solar equipment and some chemical products are areas where European dependence on China is particularly high. Automobiles and machinery also face growing Chinese competition. It is in these strategic sectors that public procurement, incentives or European content requirements can make sense. The goal is not to protect inefficient companies, but to preserve industrial capacity, technology and intellectual property. A factory located in Europe is not necessarily a European value chain.
A third reflection is that no trade barrier replaces competitiveness. Europe faces more expensive energy, fragmented capital markets, smaller business scale and excessive regulation. Tariffs may temporarily protect a factory; they cannot make competitive an economy that structurally produces more expensively. Trade policy must therefore be accompanied by a genuine competitiveness policy. For Portugal, this change may represent an opportunity, but renewable energy, Atlantic position and an export-oriented industrial base are not enough without better networks, qualifications, capital and execution capacity.
