EU leaders ask Brussels to come up with new trade weapons to counter China shock

Lead

European Union leaders have instructed the European Commission to develop a tougher trade strategy to counter what they see as a Chinese-driven threat to European industry, according to multiple reports from the South China Morning Post.

At a European Council summit in Brussels, leaders from the 27 member states called on the EU's executive branch to expand the bloc's trade defence toolbox against "global macroeconomic imbalances" — widely understood as a reference to China's industrial overcapacity. The commission was told to both engage with Beijing to address trade problems and prepare new instruments to defend European interests, a Brussels official said.

Coverage comparison

Reports describe a bloc converging on the need for urgent action. A broad coalition of member states now supports developing a trade strategy that could involve multiple new instruments and a more rapid, strategic use of existing ones, several sources told the South China Morning Post. One tool under discussion could be modelled on US President Donald Trump's Section 301 tariff measures, an idea first floated by French President Emmanuel Macron.

A senior diplomat from a supportive member state, speaking anonymously, said there were "different strands: a diversification instrument and a more protective instrument," and that the commission needed guidance from leaders to find a compromise. The diplomat confirmed Macron's call for a "Section 301" as a metaphor for an overcapacity instrument, adding that while "China is a problem," it would be preferable for the tool to be "country neutral."

The same reports note that European leaders' willingness to discuss China policy openly is relatively new — the summit debate was their first meaningful one on the subject in three years. Officials said the lack of written outcomes should not be "confused with inaction" and that the council intended to give the commission "very powerful" guidance.

Key claims

• EU leaders asked Brussels to develop new trade instruments to deal with what is described as the economic threat posed by China, following a rare summit debate on the issue.
• Measures under discussion include sector-wide tariffs and other restrictions in industries such as chemicals and green technology, according to reports.
• The EU's goods trade deficit with China exceeds €300 billion (US$342.76 billion), as reported by the South China Morning Post, which called it a "convenient political flashpoint."
• Volkswagen is reportedly planning up to 100,000 job cuts in the face of Chinese competition, according to news that broke after the summit.
• Beijing has cancelled two high-level meetings with the EU this month, including a ministerial-level digital dialogue and a visit by deputy secretary general of the European External Action Service Olof Skoog, according to the Financial Times as cited by the South China Morning Post.
• The EU and China are launching a new trade and investment consultation platform designed to streamline communications, EU sources confirmed to the South China Morning Post.

Perspectives

Beijing-linked think tank

A researcher at the China Institutes of Contemporary International Relations, Guo Mingxu, accused the EU of clinging to a "flawed narrative" that China's economic rise is an inherent threat to Europe. He wrote that narratives such as "China's industrial upgrading equals a threat" are proliferating, as if China's normal development were "an offence — a kind of 'original sin' against Europe."

EU sources

EU sources told the South China Morning Post that the postponed meetings were not a retaliatory move by Beijing. One senior source said, "We have to face the reality — China's economic model, driven by overcapacity, will not change. We have to live with it and change ourselves." The response is seen as a means of managing fallout from spiralling trade tensions, given low expectations of a grand bargain.

Analysts and observers

Commentary in the South China Morning Post argued that the "overcapacity" debate is a misnomer, noting that China's manufacturing capacity grew because it integrated into global supply chains and did what its trading partners asked. Another piece highlighted the paradox that Europe wants cheaper clean energy while complaining about China's production of solar panels, wind turbines, batteries and EVs. A working paper by Brussels-based think tank Bruegel acknowledges China's industrial policies made it the global leader in renewable technologies but at the cost of severe overcapacity and weaker profitability.

Multiple analyses call for strategic patience and warn against a mutually destructive trade war, drawing parallels to Europe's trade conflicts with Japan in the 1970s and 1980s, which were resolved through import quotas and anti-dumping measures rather than outright tariffs.

The European Commission has yet to confirm the specific instruments it will propose, but officials expect a more robust use of existing tools, including safeguard measures that can impose tariffs and quotas on entire sectors.