The European Union is preparing to use a broader range of economic measures to reduce what European Commission President Ursula von der Leyen described as an unsustainable trade deficit with China.
Speaking to the European Parliament on Wednesday, von der Leyen said the imbalance had reached a critical point, with the EU running a goods trade deficit with China equivalent to around €1 billion ($1.15 billion) a day last year.
She warned that Europe was experiencing what she described as a second “China shock”, with growing Chinese industrial exports contributing to pressure on European manufacturing and raising concerns about deindustrialisation.
Europe seeks concrete results
The issue has become a priority in EU China relations as European governments seek to address the growing imbalance through negotiations as well as economic policy tools.
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EU leaders asked the European Commission in June to deliver results from its dialogue with Beijing and ensure that the bloc had sufficient instruments to protect its economic interests.
European Trade Commissioner Maros Sefcovic, who is leading the discussions, has said he wants tangible progress by October.
Von der Leyen said cooperation remained in both sides’ interests but warned that the EU was prepared to move beyond dialogue if negotiations failed to produce results.
“We will use all the tools at our disposal to rebalance our relationship,” she said.
The approach reflects a broader European effort to reduce economic vulnerabilities without completely severing commercial ties with China, one of the EU’s most important trading partners.
Critical minerals add to concerns
Trade is not the only area creating pressure on the relationship. The EU also remains heavily dependent on China for several critical raw materials, including rare earth elements that are essential for industries such as electronics, renewable energy, defense and advanced manufacturing.
Von der Leyen said the EU needed to accelerate efforts to secure supplies and build strategic reserves.
The European Commission plans to establish a European corporation focused on critical raw materials to help the bloc secure and stockpile essential resources.
What’s next
The EU’s approach is likely to combine negotiations with measures aimed at strengthening its own industrial capacity and reducing dependence on Chinese supply chains.
For Beijing, the growing European focus on trade imbalances, industrial competition and critical minerals could create additional pressure to make concessions while preserving access to the European market.
For the EU, however, reducing the deficit will require more than trade restrictions. Europe will also need to expand domestic production, diversify suppliers and address the competitiveness challenges facing its own industries.
The October deadline for trade talks could therefore become an important test of whether Brussels and Beijing can reach practical agreements or whether the EU moves toward a more defensive economic relationship with China.
With information from Reuters.
