With tensions with the US easing somewhat after Europe approved the 2025 trade agreement, the bloc is focusing on China, with increasing calls for tough measures, and it is not alone.
Experts and governments are increasingly warning of a “China shock 2.0,” as an excess of cheap goods made in the Asian giant threatens manufacturers not only in Europe but worldwide, amid a growing trade deficit with China.
In Europe, the bloc’s trade goods deficit, which reached about 360 billion euros last year, is causing increasing concern, meaning that China’s exports far exceeded EU imports.
Mao Ning, a spokesperson for China’s Ministry of Foreign Affairs, said on Friday before the end of negotiations that Beijing is “closely monitoring” events and “will take necessary measures to protect its legitimate rights and interests.”
Discussions among European Commission (EC) members on Friday will prompt further talks on trade imbalances at the Group of Seven (G7) leaders’ meeting in France from June 15–17 and the EU leaders’ summit in Brussels on June 18–19.
“China’s industrial dominance is not accidental. It is the result of decades of state subsidies and market access that is not based on reciprocity,” EU industry chief Stephane Sejourne told EU ministers in Brussels on Thursday.
Later, he told journalists that based on European Central Bank (ECB) data, 29 million jobs “face very high risk in the coming months due to the trade deficit.”
Call for urgent action
Since 2023, EC President Ursula von der Leyen has promoted a “risk reduction, not decoupling” approach aimed at balancing concerns about excessive dependence on China with maintaining ties, which Brussels reiterated again on Friday.
Commissioners discussed what existing and new measures the EU should take to protect the continent’s companies from what Brussels considers unfair competition from Chinese rivals.
Industry groups in the metals, clean technologies, and fertilizers sectors, in a letter condemning unfair practices, said there is an “urgent need to apply the EU’s trade defense toolkit more effectively and quickly.”
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In recent years, the EU has tried to address the imbalance by applying higher tariffs and quotas and conducting a series of anti-subsidy investigations in the clean technologies sector, which has increased trade friction between Brussels and Beijing.
The EU is also considering following the example of US President Donald Trump and applying a measure similar to Section 301 of trade laws, which gives Washington the right to set tariffs for specific sectors, which in Europe could be the chemicals, metals, or green technologies sectors.
Chinese attempts to invest in Europe are also increasingly facing resistance.
“The most important thing is that Europe already has a trade defense arsenal. What is missing is the political will to use it,” said Sander Tordoir, chief economist at the Centre for European Reform (CER).
Focus on chips
At the same time, Europe seeks to diversify its trade partners, especially in the area of rare earth elements, dominated by China’s industry, after last year’s strict Beijing export controls revealed how vulnerable the bloc is.
The EU also hopes that new rules to be presented next week will encourage local production of chips used in various electronic products.
Without naming China, four major EU economies, including France, Italy, and the Netherlands, released a document over the weekend stating that stricter measures are needed to combat the “growth of unfair trade practices.”
However, this ambition pits them against Europe’s largest economy, Germany, which exports many goods such as cars and factory machinery. Berlin fears angering Beijing and the severe consequences that could follow.
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But CER representative S. Tordoir believes that “changes are happening” in Berlin.
