Watching China in Europe - May 2026
The EU plans to ask European leaders next month for a green light to pursue far-reaching trade measures against China. It will be a test of EU unity and resolve in the face of a deepening China shock.
It has been nearly a year since Ursula von der Leyen warned Xi Jinping during a visit to Beijing that relations between the EU and China had reached an “inflection point” due to widening trade imbalances, fueled by industrial overcapacity in China. “We need to see progress on this issue. Because without, it would be difficult for the EU to maintain its current level of openness,” the president of the European Commission told China’s leader at a summit last July. Since then, one European leader after another has headed to Beijing to deliver a similar message, from France’s Emmanuel Macron and Germany’s Friedrich Merz to Spain’s Pedro Sanchez, who urged China in a speech at Tsinghua University last month to open up “so that Europe doesn’t have to close itself off.”
China’s leadership has not only ignored these messages but in recent weeks, in a series of toughly worded State Council decrees and responses to EU legislative proposals, it has threatened Europe with retaliation if it takes action to protect itself. As the threats have multiplied, so have the exports. The EU’s trade deficit with China, which reached 360 billion euros last year, continued to surge in the first quarter of this year. The Commission, according to several officials I spoke with in recent days, has now had enough. It is preparing the groundwork for a more forceful response that would include the deployment of safeguards and the development of a new instrument that would give Brussels broad-based powers to counter Chinese overcapacities. The Commission plans to ask European leaders to give it a green light to move forward with the plans at the next European Council meeting in mid-June.
Chemicals, Machinery and Cars
“The current situation is not sustainable,” an EU official involved in the plans told me. “If it doesn’t change, we will have no choice but to head into a trade conflict with China. It’s not something we want. But China is not leaving us a choice.” Until now, the EU’s trade defense strategy has relied heavily on anti-subsidy and anti-dumping cases that target a narrow set of products imported from China. But these trade cases have sucked up vast amounts of resources while covering only a small portion of the bloc’s imports from China. New legislative initiatives like the Industrial Accelerator Act (IAA) and Cybersecurity Act (CSA) won’t become law for another year or more, leaving the bloc highly vulnerable to a deepening China shock.
Safeguards can be deployed swiftly and can cover a broader set of imports. They have been used sparingly in past years to shield the European steel and ferroalloy industries. But EU trade officials are now looking to use them more broadly to protect the European chemicals and machinery industries, which are being ravaged by Chinese competition and have been lobbying the Commission to act. The idea would be to deploy safeguards as a quick-fire defense, buying the EU time to develop a new instrument that would give it powers akin to Section 301 in the United States. Beyond chemicals and machinery, officials said there was growing concern about a surge in imports of plug-in hybrid vehicles (PHEVs) from China and a determination to respond in one way or another. PHEVs fueled the surge in Chinese exports to the EU in the first quarter of this year.
Seeking a Mandate
The race to forge a consensus in support of tougher measures will start with a debate on China among EU commissioners on May 29, at which trade officials will lay out the case for tougher measures. The Commission then plans to seek a mandate from EU leaders at the European Council on June 18-19. “We will need to have a bigger conversation about China at the upcoming European Council,” a second official privy to von der Leyen’s thinking said. “We will be seeking a mandate from the leaders to deal with this systemic problem. This is about using the instruments that we have and developing new ones.”
The Commission has kept a tight lid on its plans until now given their sensitive nature — although it dropped a hint that something was up by burying plans for a Q2 proposal on supply chain dependencies in a roadmap document published last month by EU institutions. Two officials pointed me to the reference and suggested the proposal would be significant, kicking off the broader push to respond to China’s non-market policies. The moves under consideration mark a significant shift in the bloc’s trade strategy with China, from an approach defined by technocratic restraint to one driven by a growing sense of urgency and a willingness to take risks.
If the moves being contemplated by the Commission move forward, they will test EU unity and vault trade tensions with China to new heights. EU officials say robust retaliatory measures from China would be inevitable. “We need to prepare ourselves and our system for the fact that we will have to sustain pain. This will be an important part of the European Council discussion,” the second official said. “Not taking a risk is also a risk. In this case, we believe it is the biggest risk of all.”