EU shifts to tougher stance on China amid concerns over economic threats

For years, Brussels tried to square the circle on China: compete where necessary, cooperate where possible, confront only when unavoidable. That balancing act is now fraying.

A harder line is now taking shape in the European Commission, where China hawks are gaining influence in both the powerful Directorate-General for Trade and the circle around President Ursula von der Leyen. New defensive measures are being explored, including tools once considered too confrontational.

The 27 EU Commissioners are set to debate their China strategy on 29 May, with one official saying, “It will be about acknowledging there is a problem and that something needs to be done.”

Tensions flared Monday after China’s Ministry of Commerce threatened retaliation against the EU over its Made in Europe legislation, which sets strict conditions on foreign direct investment.

An EU official told EU News the Chinese were “playing games,” adding that the Commission’s priority remains engagement with Beijing through multiple channels set up in recent months.

However, Commission services are already working on new measures to address China’s economic threats, sources have confirmed. “We don’t see any move from the Chinese despite all the issues we have flagged with them, so there’s a reflection on whether we should do more,” one said.

Another source said the release of Germany’s trade deficit figures before Christmas marked a turning point for the Commission.

Data published last autumn by Germany Trade & Invest (GTAI) showed a record €87 billion German trade deficit with China — a wake-up call in Berlin, long focused on securing market access in China ahead of protecting domestic manufacturing.

China has since surged up the agenda for German industry, for the Bundestag — which has set up a dedicated committee — and for the Commission, whose German president has Berlin’s ear.

The EU has long grappled with cheap Chinese imports threatening its industry. Pressure intensified last year after the US slapped steep tariffs on Chinese goods, effectively shutting its market and pushing Beijing to reroute overcapacity in sectors like steel and chemicals toward Europe.

A recent report by the French High Commission for Strategy and Planning, a French government advisory body, warned that “the production cost gaps, as assessed by industry players [across Europe], have now reached levels incompatible with sustainable competition, averaging between 30% and 40%, and exceeding 60% in certain segments (industrial robotics, mechanical components).”

Under these conditions, how can the EU defend its market?

The bloc’s leverage is mainly limited to its 450 million-strong consumer base. Still, one source said it is “increasingly becoming mainstream” inside the Commission to warn Beijing that the EU market could close without rebalancing.

But the trade-offs are stark.

Chinese electric vehicles — hit with EU tariffs in October 2024 — highlight the dilemma. China depended equally on the US and EU markets for almost all its exports before Donald Trump’s return to the White House in 2025. “It cannot easily diversify its EVs as it will not sell in Africa, nor in Southeast Asia, where there’s no infrastructure,” another source said.

At the same time, Europe remains reliant on China imports in many of the same sectors where China depends on Europe. “Are we to close our market to lithium batteries from China? We cannot do this overnight,” the same source said. The same applies to solar panels, laptops and medical devices.

Commission explores anti-coercion tool

The EU has trade defence tools — including anti-dumping and anti-subsidy duties — but they can take at least 18 months to deploy after a complaint is filed. Two sources said the Commission is working on new instruments, but by the time they bite, the damage may already be done.

A fourth source described an overcapacity instrument as still “premature.”

However, the Commission services are also mulling the Anti-Coercion Instrument (ACI), which allows the EU to deploy a wide range of measures — from tariffs to restrictions on public procurement or intellectual property — in response to economic pressure from third countries.

The tool, sometimes described as a “trade bazooka”, has never been used since its creation in 2023, but resurfaced after China weaponised rare earth exports in October 2025 during its trade standoff with the US by imposing strict export controls.

Exports resumed after Washington and Beijing agreed on a one-year truce, which also covers Europe. But that deal expires in October 2026, leaving uncertainty hanging over the EU.

Brussels wants the anti-coercion tool to be ready if needed.

Tensions could rise further after Beijing’s threats over the Industrial Accelerator Act — the Made in Europe legislation now debated by member states and MEPs — or over pressure linked to the Cybersecurity Act, which could phase out Chinese telecom operators from the EU market.

Securing member states’ backing

However, a qualified majority of EU countries is needed to activate the ACI, and member states remain split.

“It requires a political support higher than for the traditional anti-dumping or anti-subsidies duties, which can only be rejected by a reversed majority of EU countries,” a source said.

Despite the wake-up call, German Chancellor Friedrich Merz struck a softer tone in March, floating a long-term trade deal with Beijing.

But in Brussels, that idea is off the table.

“There are a number of concerns and real challenges that the European Union has consistently expressed to China that we need to see them meaningfully address before we can even talk about any future agreements or anything like that,” the Commission’s deputy chief spokesperson, Olof Gill, said.

Spanish Prime Minister Pedro Sánchez — who has visited China four times in three years and secured major Chinese investment — backs closer ties with Beijing.

Meanwhile, Belgian Prime Minister Bart De Wever urged a tougher line in an 18 March letter to von der Leyen.

“We have arrived at a point of no return in which we need to make difficult choices in the short term towards China to protect our industries, economies and the well-being of our citizens in the long term,” he wrote.

France, long a proponent of a hard line on China, shares that view.