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On the trade question, the Union is trying to appear firmer toward China. What is the reality, backstage, within the Commission and the European institutions? Is there a real sense of urgency?
In recent years, the Union has come to recognize the asymmetry of its relationship with China and the threat it poses to European industry, but it is only in the past year that this assessment has become an emergency.
However, one should not interpret this concern as a Trump-style obsession: it is known that the American president hates, in principle, any trade deficit. In Europe, this is more of a useful indicator than a source of worry in itself. When I speak with Brussels officials who work specifically on China, they ask first what this deficit truly means. The new five-year plan clearly signals Beijing’s intention to continue relying on growth driven by exports. If nothing is done, this trend will lead to the deindustrialization of certain regions of Europe.
This conviction that there is urgency and that action must be taken is expressed within the Commission, at least in the trade services and within the European External Action Service. But their capacity to act is structurally rather limited.
Could you give an overview of these limits?
The first is one of capacity: for years, alarms have been raised about how the Chinese economic model poses a challenge to European industry. Yet the Commission is constantly pulled in other directions, such as recently the Iran crisis or the provocations from Donald Trump. The Chinese problem has thus been set aside for a long time, until it became too obvious to ignore.
Once the urgency is recognized, what can the Commission actually do?
Here we touch on the second structural limit: while China and the United States act unilaterally, the European Union adheres to the rules. It does not seek to disrupt the established order, unlike Washington and Beijing, which do not hesitate to depart from certain fundamental principles of international trade. Yet, respecting the rules also comes with constraints.
The third problem is the necessity to obtain the agreement of all member states before concrete measures can be taken. These states are notoriously divided on the China question. At the June European Council, they tasked the Commission with intensifying dialogue with Beijing to find a diplomatic solution to the imbalances in trade, thereby opening the door to three months of negotiations. We are therefore far from a direct move to action. National interests often restrict the Union’s room for maneuver.
So would the Union be far more proactive on the China dossier than the member states themselves?
Yes, and the reasons are both institutional (the Commission is in charge of trade policy) and geopolitical. The Commission’s approach is indeed more proactive, because it was at the EU level that the response to Russia’s invasion of Ukraine was organized, and work was done on the links between Russia and China.
Yet the constraints I have just cited collectively create a paradox. This “China shock 2.0” is clearly seen as an emergency, yet Europeans seem determined to give negotiations a chance. The urgency asserted does not necessarily translate into the speed at which measures are taken.
What about the internal dynamics within the Commission? Is there unanimity among the College on the need to act?
Stéphane Séjourné appears more energetic. He would like the Commission to move faster, especially regarding the industrial roadmap. On this point, he is aligned with the French position. Maroš Šefčovič, the Slovak Commissioner for Trade, Economic Security, Interinstitutional Relations and Transparency, sees himself more as the architect of a future deal with China. He is nicknamed Mr. Fix-it (the man who fixes all problems), particularly because of his role during Brexit.
Commissioners each have their own personalities, which can lead to certain shifts. For example, last year, within a sanctions package targeting Russia, the Union added two Chinese banks to its list of sanctioned entities because they facilitated cryptocurrency transactions intended to ship goods under sanctions to Russia. In April 2026, these two banks were finally removed from that list. This decision sparked debate within the Commission. Some argued that keeping the two banks under European sanctions would showcase the Union’s leverage in a potential standoff. China had reacted particularly badly, which indicated real dissatisfaction. But the withdrawal occurred after it threatened to cancel the financial talks, which alarmed some commissioners who were keen to preserve their countries’ relations with China. It is clear this contributes to hindering the decision-making process.
Who really sets the European policy toward China?
The broad lines are drawn at the highest level. It is Ursula von der Leyen and her close circle of advisers who determine clearly the line to follow, and she ultimately assumes responsibility for it. A longtime advocate of a hard line toward China, she has consistently shown firmness in defining this stance.
To implement this “hard line,” what is the Union’s toolbox of measures?
I will start by citing the measures that are most frequently used: anti-dumping and anti-subsidy investigations. The drawback is that they have a very limited scope. They typically cover only a single product at a time, and the products targeted by these investigations are not the most strategic. I recall an open investigation into candles or Peking duck. One can question how strategically important those are. These tools therefore are not the best suited to address the systemic challenge posed by a power like China.
Today, there is increasing talk of safeguard measures, which are used more in steel and ferroalloys sectors. Investigations are also being studied in the chemical and machine tools sectors. There are even rumors of mobilizing such tools for plug-in hybrid electric vehicles. Safeguard measures, unlike anti-dumping measures, concern broader groups of products, which makes them interesting. But, at the same time, once put in place, they affect all trading partners. Imposing safeguard duties and quotas on plug-in hybrid vehicles would thus put us in a collateral standoff with Japan and South Korea.
National interests often limit the Union’s room for maneuver.
Finbarr Bermingham
We can also mention other measures currently used, such as foreign subsidies regulation, which can directly target Chinese companies. Beijing is highly wary of this tool, which obliges the concerned companies to provide quantities of data, sometimes sensitive, to European authorities. China even went so far as to ban this year Nuctech, a manufacturer of security and surveillance equipment used at airports, from complying with a European anti-subsidy inquiry. It was a first.
What tools are very rarely used?
The instrument relating to international public procurement has been used only once, against China, in the field of medical devices. The anti-coercion instrument, created during Donald Trump’s first term in office to anticipate the imposition of tariffs he was beginning to use, has never been used. It was the attempts by China to pressure Lithuania in 2021 that accelerated its development. Yet it has never been used, even though there have been blatant coercion cases: Donald Trump threatening the Union with tariffs if it did not amend its digital laws, Donald Trump threatening to invade Greenland… China, for its part, has imposed export controls on rare earths, which could have justified anti-coercion measures.
Are there measures in the works?
Some do indeed talk about setting up a diversification tool, i.e., a lever that would force companies to reduce their dependence on a single supply source in critical sectors, without naming China explicitly, even though it is obviously the target.
This instrument is intended to respond to the fear raised by the possible use of bottlenecks as weapons. It is about reducing one’s vulnerabilities by limiting the leverage a potential other power could exert to coerce you.
Would the member states be willing to use it?
Member states are reluctant to take firm steps toward diversifying their supplies for fear of retaliation. But the more these dependencies are reduced, the less leverage China will have at its disposal.
Another tool often discussed since the last European Council is a possible solidarity mechanism that would compensate companies that have faced countermeasures. It would involve creating a fund that, in the event of tariffs imposed by the Union on Chinese electric vehicles and countermeasures on, for example, brandy or pork, would help these companies cushion the impact. This could help overcome the reticence of some member states to move forward.
What might an agreement with China look like? Would it be a “guided” trading relationship? Purchase commitments?
The Commission seeks a rebalancing and a realignment of China’s economic and trade policy by October. I’m not convinced. What would be in Beijing’s interest? Certainly, when Chinese Commerce Minister Wang Wentao visited Brussels at the end of June, he did raise the possibility of purchase agreements: China would agree to buy more Union products to reduce the deficit. But that would not alter the underlying structure. This “guided trade” would run counter to the direction laid out in China’s official general policy documents.
Are there specific areas where progress could nonetheless be made?
Yes. For instance, Beijing emphasized the agreement on prices reached between Volkswagen and the Union as an example of areas where both sides might advance. For a long time, Chinese statements have suggested they would like to remove tariffs on electric vehicles and end export controls on ASML equipment to reduce the deficit. The latter is unlikely to come to pass, but the first could lead somewhere. At the same time, the Union would welcome an agreement on investments in Europe’s supply chain for electric vehicles.
But the more these dependencies are reduced, the less leverage China will have at its disposal.
Finbarr Bermingham
Structural problems will remain, but this could give both sides an opportunity to announce progress, which might cool the tone of the dispute.
There is often a sense that arbitrating Europe’s stance on China trade depends mainly on a France-Germany bargain, the former favoring a firm Union response and the latter much less so, being very protective of its export industries. Is this view accurate?
I would say that France and Germany actually lead the two opposite camps in the debate. I do notice, however, that member state positions on China vary more widely. Until recently, some governments took a consistently hard line against China, like Lithuania and the Czech Republic, which were very pro-Taiwan. In 2021, Lithuanians allowed the opening of a Taiwanese representation office in Vilnius. In retaliation, they were expelled from the Chinese customs system. Yet the current government is increasingly trying to reengage with China, believing that Lithuania did not benefit from the expected dividends from the Taiwanese ties. So even the most ardent advocates of a hard reaction are now shifting strategy.
The situation is also more uncertain regarding China’s allies in Europe. Consider Hungary.
Indeed, under Viktor Orbán, Hungary was probably the best ally China had in Europe. Since his departure, the situation is less clear. Interestingly, the Chinese automaker BYD has appointed the former Hungarian foreign minister Péter Szijjártó to a senior leadership post. The new prime minister, Péter Magyar, has stated he would launch an inquiry to clarify this appointment.
Belgians are among the proponents of a hard line toward China, in contrast to Spain, which has positioned itself as the new strongest ambassador of Beijing in Europe. Pedro Sánchez clearly demonstrated this at the June European Council, presenting himself as the sole dissenter opposing any action against China.
How to explain this bias?
In the Belgian case, the prime minister, Bart De Wever, was formerly mayor of Antwerp, one of Belgium’s key industrial hubs that hosts many chemical manufacturing firms. It is precisely this sector that filed the most formal complaints with the European Commission’s Directorate-General for Trade to denounce the effects of Chinese anti-dumping and anti-subsidy measures. This may help explain Belgium’s current stance.
What about other countries like Italy, the Netherlands, or Poland?
Italy aligns with France but speaks less openly. Giorgia Meloni even withdrew from the Belt and Road Initiative, under U.S. pressure, while ensuring that China does not respond too harshly, notably by permitting Chinese investments in the Italian automotive sector.
As for the Dutch, probably because of the nature of their industrial base, which relies on companies like ASML and Nexperia, they can afford to be among the most proactive on economic security.
Finally, Poland has recently emerged as one of the most critical countries toward China, notably due to its relations with Russia. The close ties between China and Russia have indeed been a major obstacle in relations with many Central and Eastern European countries. For Poland, this geopolitical aspect is not the only factor at play: the country’s trade deficit with China has skyrocketed. It has decided to act with greater regard for this purely commercial and economic dimension.
Is Germany’s stance evolving?
It is hard to extract a true consensus on the German side. Chancellor Merz has fluctuated in his positions. At present, he seems to favor the idea that China plays a role in Germany’s economic difficulties, whereas just a few months ago, returning from China, he urged the Bundestag to conclude a free-trade agreement with the country. Then, at the European Council, he called for a “Plaza Agreement” with China, referencing the monetary-management agreement the United States had with Japan in the 1980s.
Minister of Economy Katharina Reiche strongly opposes any measure against Beijing, readily minimizing the Chinese shock. How to explain?
She embodies the old German business and pressure-group tendency to guard against retaliation at all costs. I’m not entirely sure how to explain this fiercely pro-Chinese stance, nor her crusade to hinder European action on several fronts. She has even stated that there should be no fines for carmakers that do not reduce their emissions in line with European rules. Her zeal earned her a mention in a Chinese news bulletin, “Brussels Tea House,” which portrays her as the great hope of EU-China relations.
German political leaders are thus divided, but so are industrial actors.
That is to say?
Take the example of VDMA, the German professional association representing mid-sized mechanical engineering firms. Since the end of the pandemic, it has been lobbying for a more protectionist policy, as these firms have become among the first victims of China’s export wave.
For about five years, I have a biannual conversation with a VDMA official who seems to be an excellent barometer of the European industry’s stance toward China. At the start of the 2020s, VDMA was open to dialogue with Chinese firms, mainly its suppliers and customers. But now that these same firms have progressed markedly in the value chain and far outpace Europe on price, VDMA expresses far greater concern. In its view, this progress is due to the innovation capacity of the Chinese economy, but not only: it also faults unfair trading practices such as undisclosed subsidies.
VDMA and VDA, the automotive manufacturers’ association, have long opposed any form of interventionist policy. They were particularly opposed to imposing duties on electric vehicles starting in 2024. Yet there is a slight shift in stance, especially at VDMA: the Volkswagen CEO recently told investors that tariffs on electric vehicles were a good idea, and he would like duties to be applied to the plug-in hybrid vehicle sector as well.
Regardless of positions, the China shock is becoming harder and harder to ignore: 10,000 industrial jobs are being cut every month in Germany.
Is the Chinese government taking European threats seriously in case diplomacy fails?
The image Europe has projected for the past 18 months is not that of an actor ready to act and take measures. The Chinese government probably gives it little credibility, especially since the Turnberry agreement with the United States was signed. Beijing also knows that every time it takes a measure, the divisions among member states inevitably lead to a fragmented response. Simple threats of retaliation can suffice to divide: that is the lesson the Chinese have drawn from recent months, in addition to their belief that Europe lacks courage.
Has China’s showdown with the United States over tariffs strengthened its confidence?
Beijing compelled Donald Trump to back down on tariffs by threatening to restrict rare earth supplies. Since then, the Chinese have indeed displayed a certain arrogance when addressing Europeans. After standing up to the United States, could China seriously fear the European Union? It does not believe so, and even in times of tension it has shown it is willing to take risks and to go all the way.
Whatever the positions, the China shock is becoming increasingly hard to ignore: 10,000 industrial jobs are being cut every month in Germany.
Finbarr Bermingham
Europe tends to issue threats without ever following through: it has now been three years since Ursula von der Leyen delivered her risk-reduction speech, and our dependence on China has only grown.
Is there an initiative at the EU level to identify China’s exact dependencies and thus react in case of a trade war? Or is there a similar initiative?
Indeed, researchers and policymakers play that role: identifying the leverage points. A great many reports have already been published, highlighting the areas and products for which China relies on Europe. What needs to be done is to turn these into tools of power.
What are these areas or products exactly?
For example, in the aviation sector, China needs certain European components to repair its aircraft. It remains dependent on Europe for some power-generation equipment, such as turbines. What struck me most, however, is insulin. The Union holds a near-monopoly on insulin-based medicines used in China. It is still hard to imagine that lever ever being activated. It would trigger a public health crisis overnight, not to mention that Europe itself depends on China for some pharmaceutical active ingredients.
Wouldn’t the most strategic bottleneck perhaps be ASML’s photolithography machines?
That is an instructive example, because export controls on these machines were not truly European: they were imposed on the Netherlands by the United States. But beyond this detail, it is important to remember that using bottlenecks has limits, particularly in time: if China were deprived of ASML’s services, it would find ways to catch up in that field. Likewise, if Beijing used its rare-earths leverage last year to pressure the United States, that would likely be only temporary: we may have as little as ten years left before we catch up in that specific area.
If a trade war were to break out, who would have the advantage?
Beijing has shown a willingness to retaliate and to carry out its threats. Europe, on the other hand, is hampered by structural problems. It typically follows the pattern: it takes a measure, China responds, Europe protests, and returns to the negotiation table. The Union does not seem, for now, to be in a position to rival China.
However, that does not mean Europe is powerless. Instead of trying to strike one big blow, it could favor a package of targeted measures. The cumulative effect could prove decisive.
Europe tends to issue threats without ever following through.
Finbarr Bermingham
Still, I do not believe in domination by escalation. What matters, and what many officials recommend, is to oppose China’s policy with internal, national, and European measures. Dialogue with China has little chance of succeeding, and escalation even less so.
What should one monitor in the coming weeks to better understand how discussions evolve?
Announcements and statements from automakers are always very revealing, especially in Germany.
In September, Ursula von der Leyen’s State of the Union address will be particularly awaited, as she has previously used it to announce measures related to China, such as the ban on products made with forced labor, the “Global Gateway” initiative, and the probe into electric vehicles. Another notable element: the planned trip of Commissioner Šefčovič to China in early October, which should help assess the state of negotiations and progress made. The October European Council could be pivotal.
We must also mention another event outside Europe, but arguably the most important this fall: the summit between Donald Trump and Xi Jinping in late September, which should lead to an extension of the moratorium on export controls for rare earths. If this does not occur, European industry could find itself in serious trouble, especially in terms of rearmament and support for Ukraine.