EU readies tougher China trade stance as USD 1 billion-a-day gap widens

The European Union is preparing for a sharper trade confrontation with China as a gap in trade worth more than USD 1 billion a day fuels concern over jobs and pressure on its key industries. The tougher mood comes ahead of a two-day visit to Beijing from Thursday by the European Commission's top trade envoy, Maros Sefcovic, for talks with Chinese Commerce Minister Wang Wentao on narrowing the EU's 360 billion euro, or USD 410 billion, trade deficit with China.

The debate has gathered pace across the 27-nation bloc, with lawmakers and economists warning that Chinese subsidies and rising exports are hurting sectors ranging from steel to cars. The European Parliament on Wednesday voted 454 to 86 for a resolution calling for "economic reciprocity and a proportionate EU response if China does not open its markets", even as questions remain over how far the EU is willing to go and China signals it is ready for a long dispute.

Earlier this year, Sefcovic had given Beijing until October to deliver meaningful results on reducing the trade imbalance. European concern has grown after China diverted more exports to the EU and other markets following higher US tariffs. In a debate in Strasbourg on Tuesday, lawmakers expressed both anxiety and defiance over the bloc's trade relationship with China.

Ahead of the parliamentary vote, Belgian lawmaker Hilde Vautmans, who led the resolution, said, "Europe has economic power; it's time we used it." The EU has already introduced trade measures on Chinese steel imports and small e-commerce parcels, but wider options being discussed range from tariffs to use of the bloc's so-called "trade bazooka", the Anti-Coercion Instrument.

France's High Commission for Strategy and Planning said in February that the EU should move quickly, including by imposing 30 per cent tariffs on many Chinese exports and devaluing the euro against the Chinese currency. German car sales in China are falling, while Chinese companies are seen as gaining ground in Europe by undercutting European automakers with the help of heavy state subsidies. Mass layoffs have already taken place at major manufacturers such as Volkswagen.

A letter from France and Germany, seen by The Associated Press, called for a sweeping rethink of the EU's China policy. Among its proposals was making it easier for the European Commission to use the Anti-Coercion Instrument, a set of measures that has never been used before and allows the bloc to block or restrict trade and investment from countries judged to be putting undue pressure on EU member states or companies. Even so, not all EU countries support a hard line. Spain, the eurozone's fourth-largest economy, has taken a less adversarial approach, and Prime Minister Pedro Sanchez has visited Beijing four times in three years.

The European Policy Centre in Brussels said in June that European producers of batteries, solar panels, steel, electric vehicles, chemicals and machinery are already haemorrhaging jobs and capacity. European Commission President Ursula von der Leyen described the trend as another "China shock" for Europe, similar to what happened in the United States in the early 2000s when hundreds of thousands of factory jobs were lost. Tim Ruhlig, a China analyst at the European Union Institute for Security Studies, said the EU's weak economy needs both domestic changes and a more aggressive foreign trade policy, especially towards China. He also said European businesses and political leaders share some responsibility. "It's clear that just protecting yourself from China is not the future," Ruhlig said. "But to have a chance of making yourself ready for future technologies and to remain competitive in the coming 15-20 years, you have to protect yourself." Ruhlig said a complete disengagement from China, like the EU's break with Russia after the invasion of Ukraine, was not possible, but momentum was building to reset trade ties with Beijing. "Where do we make ourselves independent or at least more diverse? And where do we still work with the Chinese?" he asked.

China, for its part, has warned against protectionist action. Responding this week in Beijing to the France-Germany letter, a spokesperson for China's Ministry of Commerce said countries should avoid pushing the EU towards such measures. "Protectionism cannot enhance competitiveness, and decoupling or cutting off supply chains will only harm others without benefiting oneself," the ministry said. China is the EU's second-largest goods trading partner after the United States, according to European Commission data. China's customs agency said exports to the EU rose 15.3 per cent in the first eight months of this year, while imports from the EU rose 6.2 per cent. An editorial in the state-run Global Times last month said, "The EU does not have the capacity to wage a trade war against China. If it is truly determined to do so, then let it try."

China's exports to Europe, Southeast Asia, Latin America and Africa increased after US tariffs took effect last year, and the country still recorded a USD 1.2 trillion global trade surplus in 2025. Max Zenglein, Asia Pacific senior economist at The Conference Board, said China's export machine had remained notably resilient despite US tariffs and other restrictions. This past weekend, before the Sefcovic-Wang meeting, China opened an anti-dumping investigation into EU exports of p-nitrotoluene, used in dyes and pharmaceuticals, after warning last month that it would retaliate if the EU brought in tougher trade measures. "China has been battle-tested by successive rounds of external pressure and, so far, has largely stared down attempts to force a change in course," Zenglein said.

With China's economy still relying heavily on exports as domestic demand stays weak, and with the EU importing large quantities of Chinese lithium-ion batteries and hybrid electric vehicles, the trade relationship remains deeply interlinked. Chinese carmakers are also expanding production capacity in Europe. Bank of America economists said recent stability in US-China ties after a summit between Chinese President Xi Jinping and President Donald Trump had shifted greater attention to China-EU relations, while Zenglein said Chinese investment in Europe could become one of Beijing's bargaining chips as EU countries compete for capital, jobs and manufacturing projects. The coming talks in Beijing are therefore set against growing pressure in Europe for a tougher response, and firm signals from China that it is prepared to push back.

With PTI Inputs

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