EU officials fear leaders will balk in confronting China

The European Union’s latest bid to reset its trade and economic relationship with China is already floundering, with some member states and officials involved in the planning skeptical that the bloc is ready to take decisive action should diplomacy fail.
Despite a renewed campaign to take a tougher stance toward Beijing, the EU doesn’t have the political will to institute meaningful change or pick a fight with China, according to people familiar with discussions among the bloc’s leaders as well as talks in the European Commission, which handles trade matters for the EU.

Member states are aligned on the severe stakes posed by China’s dominant economic position. But leaders can’t yet agree on what tangible steps to take to fix a trade deficit that now exceeds €360 billion ($410 billion) or how to make domestic industries competitive against Chinese companies that rely on state subsidies, said the people, who spoke on the condition of anonymity.


“It is clear that Beijing has no intention to act unilaterally against what Brussels sees as rampant industrial overcapacity fueled by industrial subsidies and insufficient domestic demand,” Gabriel Wildau, a managing director at the advisory firm Teneo, wrote in a note. “There is no sign of policy action forceful enough to materially reduce the trade surplus with Europe.”

In a statement, the commission’s deputy chief spokesperson, Arianna Podestà, described the EU’s approach to China as “engagement through dialogue, while pursuing a policy of de-risking and diversification.”

She added: “It is of primary importance that we restore balance in our trade relationship with China.”

Beijing has so far been reluctant to focus talks on moderating its exports, preferring instead to facilitate more EU exports, according to the people. But the EU is keen to tackle both issues, given the vast trade gap as well as China’s market barriers and moderate consumption. China is also open to jointly monitoring for trade spikes.

Beijing is pursuing a transactional approach to negotiations and wants the EU to reciprocate any changes it makes, said the people. The EU has proposed “white lists” of trusted companies that could avoid resubmitting applications for critical supplies, and is asking Beijing to reduce market access constraints. The bloc will also keep pushing for China to abate its exports, the people said.

Despite the existential nature of the threat to European industry, EU leaders failed to land on the same page over what to do about the situation when they met last month in Brussels to discuss a way forward, according to the people.

Several leaders wanted to promptly give the commission a mandate to develop and deploy new instruments to counter Beijing, while others took a more wait-and-see approach and pushed to resolve differences through dialog, the people said. Others cautioned that the battle was already lost and the EU should rapidly focus on mitigating the consequences given how deeply dependent it had become on China in sensitive sectors.

The EU’s problem isn’t a lack of tools, according to one senior official — it has the instruments that would hand it ample flexibility to act if there was the will to do so.

One such solution is the so-called anti-coercion instrument, which allows the EU to target and adopt numerous tariff and non-tariff responses to coercive practices if member states back the approach. So far, the bloc has never used it.

Another official said not enough member states are willing to absorb the pain that would follow any inevitable Chinese retaliation. Both officials pointed to how the EU negotiated with the US, when the bloc shied away from a robust approach before ultimately settling for a lopsided free-trade accord in which it accepted an American tariff on its goods while removing tariffs on US products.

China retains a stranglehold on minerals and chips critical to key European industries such as defense and automobiles. This complicates the EU’s efforts to get tough on Beijing as the government in China is able to use export controls to bring European companies to their knees. And Beijing has already cautioned that it’ll fight any EU moves to protect its industries and expand its policy toolkit.

In 2025, China showed some of the damage it can do with its export controls, when it imposed restrictions on rare-earth elements, causing global panic about shortages and manufacturing shutdowns.

In a display of just how vulnerable the EU is to supply disruptions, European carmakers successfully lobbied the commission earlier this year to temporarily suspend sanctions on a major Chinese semiconductor supplier. Without an exemption, the companies warned that they’d run out of stock in a matter of weeks.

To be sure, the EU will continue to sanction some Chinese firms aiding Russia and to adopt measures such as anti-subsidy related tariffs and other countervailing sectoral moves, said the people. But it’s unlikely that the EU will embrace the more radical action suggested by the commission that would be needed to try and rewire the trade relationship with Beijing, given the bloc’s hesitance to engage in a trade conflict.

Following a meeting on Monday with Chinese Commerce Minister Wang Wentao, the EU’s trade chief, Maros Sefcovic, told reporters they had agreed to set up consultations and working groups to tackle trade disagreements on matters such as export controls and investments. They set an October deadline to make progress on those issues.

“The gap is widening. China’s exports to the EU keep rising, while our market share in China keeps shrinking,” Sefcovic told reporters after the meeting. “This trend is not sustainable. The status quo is not an option.”

China and the EU will hold as many as two ministerial-level meetings every year under new format, said He Yadong, a spokesperson for the Chinese Commerce Ministry, during a Thursday briefing. The two sides will also increase talks on export controls to ensure global supply chains aren’t disrupted, he added.

At the same time, the commission is reviewing its current trade defense tools and exploring new ones, said Podestà, the commission spokesperson. The bloc is also looking at ways to diversify its supplies, similar to how it weaned itself off Russian energy, and how to support industries that may be hit hard by any disruption.

During a meeting with ambassadors from the bloc’s member states, Sefcovic expressed confidence that the fresh talks would lead to results, people briefed on his comments said.

The EU’s trade chief acknowledged that not all issues would be solved by the October deadline, but said he hoped there will be a clearer understanding on how to rebalance trade flows, some of the people said. Sefcovic is expected to travel to China in October, ahead of an EU leaders summit in Brussels where the issue will be on the agenda, the people said.

The bloc’s trade chief didn’t explain how this renewed dialog differed from previous efforts. Nor did he disclose what tangible results he expected by the deadline – and what would be the consequences if they weren’t achieved.