EU leaders back stronger trade defences amid China export surge

European Union leaders agreed during talks in Brussels on Thursday that the bloc must develop beefed-up trade defences to curb a surge of Chinese exports, which Brussels considers an existential threat to European industry—while simultaneously seeking "constructive dialogue" with Beijing. There is a growing consensus in the EU that it is too dependent on China, leaving it vulnerable to potential coercion and supply shocks. The bloc's goods trade deficit with China reached around €360 billion ($413 billion) last year, meaning Chinese exports sharply exceeded EU exports.

During a two-hour summit dinner, leaders discussed how to address the imbalance and whether the bloc needed to boost its arsenal. After the talks ended early Friday, an EU official said leaders tasked the Commission with continuing "constructive dialogue with our main economic partners" without directly naming China. They also asked the executive "to develop and eventually complement the toolbox in the area of trade defence" and ensure the EU has "all the instruments it needs to defend its interests and derisk."

While EU capitals agree on the diagnosis, positions differ on the cure, and several leaders on Thursday called for dialogue as a priority. Spanish Prime Minister Pedro Sanchez struck a more conciliatory tone before the dinner: "We need friends, we need balanced relationships, we need to be pragmatic, and we need to build bridges both with major economies and potential allies, such as China."

One way to beef up the EU's arsenal could be creating a new tool to impose sector-specific tariffs on items like chemicals or green tech, taking a page from President Donald Trump's playbook. French President Emmanuel Macron last month called for a "European equivalent of Section 301"—the trade tool Trump has used to set sweeping tariffs—arguing Europe's "sovereignty is at stake." Germany had previously adopted a cautious posture due to its greater exposure to potential retaliation but appeared to be shifting towards France's view. A German official said Berlin was "open" to new tools if necessary, provided they were "not targeted at specific recipients." Irish Prime Minister Micheal Martin said he wanted to see "the shape and nature of any mechanisms" but warned that Europe must understand the consequences.

Concern over Chinese dominance is not limited to the EU; fears are rising in the West about Beijing's control of rare earth minerals used in electronics. Brussels often emphasises fair competition, pointing to the unfair advantage Chinese companies gain from massive state subsidies. Between 2005 and 2024, Chinese firms received an estimated three to eight times more government support than firms in OECD countries, according to the OECD, which calls it a conservative estimate.

Despite hardening resolve, the EU has shown no appetite for triggering a broader trade war with China. Fears of retaliation are not unfounded: after the EU hit Chinese electric cars with higher tariffs in 2024, China imposed anti-dumping duties on European cognac. Beijing has also vowed to hit back if the EU pushes through rules excluding non-EU products from public contracts. EU Trade Commissioner Maros Sefcovic has invited Chinese Commerce Minister Wang Wentao to Brussels later this month, as the bloc still hopes to prevent escalation through dialogue.