The European Union is weighing tariffs and a never-used trade weapon as its deficit with China tops $1 billion a day and major manufacturers, including Volkswagen, make mass layoffs. The European Commission's top trade envoy, Maroš Šefčovič, was due in Beijing Thursday for two days of talks with Chinese Commerce Minister Wang Wentao. Their stated target: narrow the EU's 360 billion euro ($410 billion) trade deficit with China. Earlier this year, Šefčovič gave Beijing an October deadline for meaningful results.
Jobs are already under pressure. In June, the European Policy Centre in Brussels said European producers of batteries, solar panels, steel, electric vehicles, chemicals and machinery were losing jobs and capacity. It proposed a trade investigative body modeled on Section 301 of the U.S. Trade Act, arguing that it could respond to perceived unfair trade practices and protect European industries. That proposal would give the EU another institutional lever in a fight over who can compete, and on what terms.
Brussels Reaches for Its Trade Weapons
On Wednesday, the European Parliament voted 454 to 86 for a resolution calling for “economic reciprocity and a proportionate EU response if China does not open its markets.” Before the vote, Belgian lawmaker Hilde Vautmans, who led the resolution, said: “Europe has economic power, it's time we used it.” The EU has already introduced trade measures against Chinese steel imports and small e-commerce parcels.
Possible next steps include tariffs and the so-called “trade bazooka”: the Anti-Coercion Instrument. The EU has never used it, but it could block or restrict trade and investment from countries found to be putting undue pressure on EU members or corporations. In February, France's High Commission for Strategy and Planning called for swift action, including 30% tariffs on many Chinese exports and a devaluation of the euro against China's currency. France and Germany also proposed making it easier for the European Commission to use the instrument.
Brussels and national capitals are assembling the machinery. Its stated purpose is to defend European industry, and its tools are restrictions on trade and investment. People affected by industrial change appear mainly as lost jobs and threatened capacity in this account, while governments debate how forcefully to defend their markets.
A Trade Fight, Not a Jobs Plan
Not every EU government supports the hard line. Spain, the eurozone's fourth-largest economy, has taken a less adversarial approach to China in recent years. Prime Minister Pedro Sanchez has visited Beijing four times in three years. Across the bloc, politicians and economists describe Chinese subsidies and exports as a major threat to industries ranging from steel foundries to car factories. German auto sales in China are falling sharply, while Chinese automakers are positioned to gain European market share by undercutting prices with heavy state subsidies.
European Commission President Ursula von der Leyen called the trend another “China shock” for Europe, comparing it with the early 2000s in the United States, when hundreds of thousands of factory jobs in the American heartland disappeared. Tim Rühlig, a China analyst at the European Union Institute for Security Studies, said the EU's weak economy needed domestic reform and a more aggressive foreign trade policy, particularly with China. He also said European businesses and political leaders bore some responsibility.
“It's clear that just protecting yourself from China is not the future,” Rühlig said. “But to have a chance of making yourself ready for future technologies and to remain competitive in the coming 15-20 years, you have to protect yourself.” He said complete disengagement with China wasn't possible, and asked: “Where do we make ourselves independent or at least more diverse? And where do we still work with the Chinese?”
Markets Answer Back
China's exports to the EU rose 15.3% in the first eight months of the year, while imports from the EU rose 6.2%, according to China's customs agency. European Commission data identifies China as the EU's second-largest goods trading partner after the United States. China's Ministry of Commerce said the countries shouldn't encourage protectionist measures: “Protectionism cannot enhance competitiveness, and decoupling or cutting off supply chains will only harm others without benefiting oneself.” Last month, an editorial in China's state-run Global Times said: “The EU does not have the capacity to wage a trade war against China. If it is truly determined to do so, then let it try.”
After U.S. tariffs took effect last year, China's exports to the EU and other markets expanded. China recorded a $1.2 trillion global trade surplus in 2025, and its export sector remained resilient despite U.S. tariffs and other restrictions, said Max Zenglein, Asia Pacific senior economist at The Conference Board. Before the Šefčovič-Wang meeting, China opened an anti-dumping probe into EU exports of p-nitrotoluene, used in dyes and pharmaceuticals. Beijing had warned it would retaliate if the EU adopted tougher protectionist measures.
China's economy relies largely on exports while domestic demand remains sluggish. The EU imports substantial quantities of Chinese lithium-ion batteries and hybrid electric vehicles, and Chinese carmakers are expanding production capacity in Europe. Bank of America economists said U.S.-China trade ties appeared relatively stable after a summit between Chinese President Xi Jinping and President Donald Trump in Washington, shifting attention to EU-China relations. Zenglein said Chinese investment in Europe could become one of Beijing's bargaining chips as EU member states compete for capital, jobs and manufacturing projects. The trade contest is about power over markets; the promised protection has yet to stop the layoffs.