Will EU press the ‘kill switch’ on China? Trade war looms over talks

The EU's trade commissioner, Maros Sefcovic, arrived in Beijing on Thursday for two days of talks with Chinese Commerce Minister Wang Wentao, carrying an increasingly blunt European message that the EU’s trade relationship with China can no longer continue on its present course.

Brussels says the EU's trade deficit with China, now running at more than one billion euros a day, has reached an unsustainable level and wants Beijing to help narrow it. The most immediate test is the surge in Chinese hybrid-car exports, which has exposed a gap in the EU’s existing tariff regime.

Behind Sefcovic’s negotiating brief is a more threatening proposition from Germany and France of a new “kill switch” that could eventually shut a country or targeted products out of the EU single market.


For now, however, Brussels is trying to make the threat credible without having to use it.

The big trade deficit is getting bigger

The scale of the imbalance is what has changed the tone in European capitals. The EU’s goods trade deficit with China reached 360.6 billion euros in 2025, according to figures cited by Reuters. That was up 15% from the previous year. The deficit is now increasing at a pace that European officials regard as incompatible with the bloc’s industrial ambitions.

European officials say Chinese state support, cheap credit and excess industrial capacity are helping manufacturers produce far more than the domestic Chinese market can absorb. Those products, which are also cheaper, then find their way into foreign markets, putting pressure on European producers.

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Chinese officials argue that the trade imbalance reflects the competitiveness of Chinese manufacturing and European demand for products such as electric vehicles, batteries and solar equipment.

The Chinese central bank pushed back particularly hard on the currency argument on Thursday, saying Beijing has neither the need nor the intention to weaken the yuan to gain a trade advantage, Reuters reported. That leaves little common ground on the diagnosis, let alone the remedy.

Cars have become the immediate flashpoint

The auto industry illustrates the problem better than almost any other product. The EU imposed additional duties of between 7.8% and 35.3% on Chinese battery-electric vehicles in 2024, on top of its standard 10% car tariff. But plug-in hybrids were largely left outside that regime. Chinese manufacturers have exploited that opening aggressively.

Reuters reported that EU imports of Chinese plug-in hybrids rose 86% in the year to September while prices fell 20%. Battery-electric vehicle imports increased 40%. More than half of the imported vehicles in these categories are now coming from China despite the existing tariffs on battery-electric cars.

The Financial Times reported that Brussels had initially sought a voluntary Chinese commitment to keep hybrid exports to around 15% of the EU market but China has rejected that request. The Commission is now examining a safeguard mechanism under which a limited volume of vehicles could enter at existing rates while imports beyond an agreed threshold would face a much higher supplementary tariff.

However, a safeguard measure would normally have to apply to other trading partners as well, potentially affecting Japanese, South Korean and British manufacturers. That makes the instrument less convenient politically and economically.

The urgency is nevertheless clear. Volkswagen’s continuing retrenchment has become a symbol of the pressure on Europe’s traditional auto industry. Volkswagen announced another 50,000 job cuts in September, taking its planned reductions to roughly 100,000.

China rejects the easy compromise

EU trade commissioner Sefcovic’s preferred outcome of talks with Beijing is not a trade war. He wants Beijing to offer something tangible that can be presented to European leaders at their October 15-16summit.

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That could involve restraints on particular Chinese exports, greater access for European companies in China or progress on critical raw materials. Brussels is also pressing Beijing over rare-earth magnets and other minerals vital to European carmaking, clean technology and defence. China’s licensing system for those materials has become a major source of anxiety among European manufacturers.

But the negotiating gap is wide. The FT reported that China is resisting voluntary export restrictions and is reluctant to make substantial tariff concessions. China, meanwhile, wants the EU to remove sanctions on Chinese companies accused of supporting Russia and ease export controls on sensitive technology, including Dutch ASML chipmaking equipment.

This is why the hybrid-car dispute goes beyond the auto industry. If Sefcovic cannot extract even a limited concession from Beijing, pressure will grow inside the EU for unilateral action.

The Franco-German ‘kill switch’

Germany and France have already moved the argument to another level. In a letter to European Commission President Ursula von der Leyen, Chancellor Friedrich Merz and President Emmanuel Macron called for a rapid-response trade instrument capable, in extreme circumstances, of cutting off access to the EU market. That's why it is ebing called a "kill switch". The proposal is deliberately country-agnostic, but China is plainly its central reference point.

The instrument would be a kind of economic deterrent. It is meant to give Brussels the ability to respond quickly if another country restricts critical supplies, subsidises production on a massive scale or otherwise seeks to distort European markets.

Sander Tordoir, chief economist at the Centre for European Reform, described the proposal to the Financial Times as a “watershed moment” for Germany. Berlin, he argued, is no longer naïve about China’s trade and industrial policy.

That is a significant political shift. Germany has traditionally been among the EU countries most wary of confronting Beijing because its exporters depend heavily on the Chinese market. But the deterioration of Germany’s industrial base has changed the calculation.

Noah Barkin of the Rhodium Group told the FT that Beijing could retaliate against such measures. Yet, he argued, Europe needs to demonstrate that it is prepared to act forcefully if it wants a productive conversation with China.

Brussels has weapons but does it have the nerve?

The EU already has substantial trade-defence powers. It can impose anti-dumping and anti-subsidy duties and has an anti-coercion instrument capable of targeting goods and services from a country that uses economic pressure against the bloc. But it has never used the anti-coercion instrument.

That is why the new “kill switch” is as much about credibility as legal power. One EU diplomat told FT, “The problem is not the lack of instruments, it is the lack of willingness to use them.”

China has reason to doubt European resolve. During previous disputes over critical minerals and semiconductor supplies, European industries warned that production could be interrupted. The fear of retaliation helped push EU towards compromise. China may therefore calculate that Europe will again blink first.

The bigger battle is over Europe’s industrial model

The dispute is ultimately larger than the bilateral trade deficit. Europe is confronting the consequences of a Chinese manufacturing model that has become exceptionally competitive in sectors the EU considers strategically important.

The United States is confronting the same problem. On Wednesday, the EU joined a group of market-oriented economies, including India, in a US-led statement criticising structural excess industrial capacity and non-market policies that encourage overproduction. China was notably absent.

The difference is that Europe is more economically intertwined with China than America is. It cannot easily replace Chinese batteries, machinery, chemicals or critical minerals. Nor can it afford a prolonged disruption in the auto sector.

That makes the threat of a trade war real, but it also explains why Brussels is searching for a negotiated solution right up to the last moment.

Sefcovic’s Beijing mission is therefore less about securing a grand bargain than testing whether Beijing is willing to make enough concessions to prevent Europe from reaching for its new weapons.

If China does not relent, the next battlefield will be Brussels. EU leaders meeting next week will have to decide whether the “kill switch” is merely a deterrent or something they are actually prepared to use. And that's when the trade dispute could turn into a trade war.