EU gets tough on China as trade imbalance stokes deindustrialisation fears

Talks between EU trade commissioner and Chinese commerce minister come as bloc seeks to limit influx of Chinese imports.

As European Union trade commissioner Maros Sefcovic hosted Chinese Commerce Minister Wang Wentao in Brussels for talks on Monday, the Slovak diplomat was all smiles.

But behind the diplomatic niceties, Sefcovic’s message to China rang out loud and clear.

Addressing the media after a marathon day of negotiations with Wang, Sefcovic may not have literally said “enough is enough,” but he hardly needed to.

“China’s exports to the EU keep rising, while our market share in China keeps shrinking,” Sefcovic said.

“This trend is not sustainable. The status quo is not an option.”

For a long time, Europe was seen as the Transatlantic counterargument to United States President Donald Trump’s protectionism, defending free commerce and trade against a rising populist tide.

That now feels like a distant memory.

Chinese firms’ rapidly growing footprint in Europe, facilitated by China’s huge subsidisation of industry and huge economies of scale, has rattled European firms and shaken the bloc’s leaders into action.

In a speech to the G7 last year, European Commission President Ursula von der Leyen dubbed Chinese industry’s growing dominance overseas a “new China shock”.

While there is a variety of views among EU member states about how far the bloc should go to push back against the wave of Chinese goods flooding into the market, there is broad alignment on the need to take action to safeguard domestic industry.

“The mood has shifted because there is real danger for European companies and everyone is starting to realise it,” Philippe Le Corre, a professor of international relations and Asian studies at ESSEC Business School in Cergy, France, told Al Jazeera.

“This is the new normal,” Le Corre added.

“There is no reason the Europeans should be sitting on the side, waiting for the Americans and the Chinese to find a compromise on big issues. The EU needs its own policies including vis-a-vis China.”

China’s trade surplus with the EU hit 360.6 billion euros ($411bn) in 2025 – the equivalent of 1 billion euros a day and up 15 percent from the previous year.

Chinese firms now dominate Europe’s supply of goods in a host of critical sectors, including solar panels, rare earths, chemicals, and industrial robots.

Meanwhile, Chinese companies are increasingly challenging some of Europe’s most prized legacy companies on their home turf, particularly car makers.

EU tariffs of up to 35.3 percent on Chinese electric vehicles have done little to slow the advance of popular brands such as BYD, Geely and Chery.

In May, Chinese models surpassed 10 percent of total auto sales in the bloc for the first time, according to Dataforce.

The fallout for many of Europe’s top car brands, some of the most enduring symbols of European industrial innovation and design, has been devastating.

Last week, German media reported that Volkswagen was preparing to cut as many as 100,000 jobs – about 15 percent of its workforce – in what would be the biggest restructuring in the history of the global automative industry.

BMW has announced plans to cut about 5 percent of its workforce by the end of 2026, while fellow luxury brand Mercedes-Benz has paused employee bonuses and offered thousands of workers voluntary redundancy.

China has rejected accusations that it encourages industrial overcapacity to flood the international market and threatened to retaliate if the EU takes action to correct the perceived trade imbalance.

“China is able to cope with a situation where China-EU economic and trade relations deteriorate further or even slide to the freezing point,” Yuyuantantian, a social media account linked to Chinese state media, warned before Sefcovic and Wang’s talks.

“China does not want to go that far but it is not afraid to go that way.”

Among other measures under consideration, EU has proposed overhauling the Cyber Security Act to bar Chinese firms from critical infrastructure; drafted legislation, the Industrial Accelerator Act, that would prioritise EU-made goods in public procurement; and floated plans to force European companies in sensitive industries to source components from at least three different suppliers.

Several other measures targeting Chinese imports are due to take effect on July 1, including a reduction in the duty-free quota for imported steel and a 3-euro ($3.42) customs charge on small parcels.

While EU member states are coalescing around a tougher line on China, the bloc is also widely seen as eager to avoid a full-blown trade war with the world’s second-largest economy.

Following Monday’s talks with Wang, Sefcovic touted their “constructive” dialogue and expressed optimism that Brussels and Beijing were “starting to understand each other better”.

“That is why today’s talks – and the ones to follow – matter. They help us avoid unnecessary tension,” he said.

Sefcovic and Wang said in a joint media release that they identified four “workstreams” for their next round of negotiations in October, including export controls and trade and investment balancing.

Sefcovic and Wang said they also agreed to establish a joint trade monitoring mechanism “with a view to improving transparency, enhancing mutual trust and managing trade frictions”.

For Europe, the hope will be that China accepts meaningful concessions to keep its access to the European market, averting a damaging trade war.

While EU leaders are concerned about Chinese retaliation, they are unlikely to settle for face-saving or non-substantive measures due to the stakes for European industry, said Alicia Garcia-Herrero, chief economist for the Asia Pacific at Natixis in Hong Kong.

“The number of job losses and so on is so huge that it would be surprising to me,” Garcia-Herrero told Al Jazeera.

Trade analysts predict Trump’s latest push could accelerate the ‘reorientation’ of global trade away from the US.

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British Foreign Secretary Yvette Cooper hails ‘candour and respect’ in new ties with Beijing, despite differences.

The war in Iran, Ukraine and economic challenges are expected to be a key part of the agenda.

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