Brussels fires starting gun on tougher China trade policy, as Beijing vows retaliation

Lead

The European Commission has agreed on a tough new approach to trade relations with China, setting the stage for a period of heightened economic confrontation between Brussels and Beijing. The move comes as China has vowed retaliation against EU measures, and both sides are preparing for high-level talks to manage the fallout.

Coverage comparison

Reports from the South China Morning Post indicate that the European Commission's orientation debate on China policy, held on Friday, marked the "firing of a starting gun" for an intense period of EU policymaking on China. Trade chief Maros Sefcovic laid out the case for stronger defensive steps against what is described as a new "China shock" to European industries, according to people briefed on the event.

The debate is part of a broader push by the EU to recalibrate its economic relationship with China, which the European Commission has declared "unsustainable," pointing to a daily trade deficit of €1 billion (US$1.16 billion) and concerns over Chinese manufacturing overcapacity. The EU is considering a range of measures, including a new "diversification instrument" that would compel companies in critical sectors to expand their supplier base, and the broader use of safeguard measures to protect European industries.

However, the South China Morning Post also reports that the economic data paints a more nuanced picture. China's capacity utilisation of its ferrous metals sector was 78.1% in 2024 and 79.7% last year, figures that fall within the range that most in the EU consider healthy. In contrast, the EU's crude steel output fell to roughly 126 million tonnes last year, implying a capacity utilisation percentage in the mid-60s. This has led to accusations of double standards, with some arguing that the West applies different metrics to Chinese output than to its own.

Key claims

• The European Commission declared its trade and economic relationship with China "unsustainable," citing a daily trade deficit of €1 billion and concerns over Chinese overcapacity.
• EU trade chief Maros Sefcovic confirmed plans to introduce a new rule to compel companies to diversify their suppliers, modelled on the EU's efforts to reduce reliance on Russian energy after 2022.
• The EU is preparing new safeguards effective July 1 that would slash duty-free quotas by 47% and double tariffs to 50% on certain goods.
• China's Commerce Minister Wang Wentao is expected to visit Brussels for talks with Sefcovic on June 29 and 30.
• An EU-China dialogue on digital matters, initially scheduled for June 23 in Beijing, has been postponed.
• China's trade surplus reached a record US$1.19 trillion last year, according to Chinese customs data.
• China's capacity utilisation in the ferrous metals sector was 78.1% in 2024 and 79.7% last year, while EU crude steel output fell to roughly 126 million tonnes.
• The EU is considering introducing a new instrument to reduce reliance on Chinese suppliers, potentially requiring companies to have three or more suppliers in two or more countries.
• A coalition of EU member states, including Spain, Italy, the Netherlands, France, and Lithuania, is pushing for a tougher trade regime, including faster emergency tariffs and broader safeguards.

Perspectives

European Commission

The European Commission, led by President Ursula von der Leyen, supports a more robust approach to China, with trade chief Maros Sefcovic advocating for new tools to address overcapacity and supply chain dependencies. The Commission has declared the trade relationship "unsustainable" and is preparing a range of measures, including a diversification instrument and broader use of safeguards.

China's Ministry of Commerce

China's Commerce Minister Wang Wentao is expected to visit Brussels for talks, and Beijing has vowed retaliation against EU measures. China has also confirmed that a "trade and investment consultation mechanism" is being discussed, indicating a willingness to engage in dialogue despite the tensions.

EU member states

A coalition of major EU member states, including Spain, Italy, the Netherlands, France, and Lithuania, is pushing for a much tougher trade regime, advocating for faster emergency tariffs, broader safeguards, and new anti-circumvention powers. Their paper calls for a more aggressive response to "systemic and structural industrial overcapacity."