The EU desperately wants a powerful trade 'big stick'—yet is utterly too weak to lift it!

Translated, this means: massive industrial capacity ultimately has only one outlet—exports. The report also estimates that around 55% of Europe’s manufacturing sectors face the risk of losing market share, driven in part by a price advantage stemming from an estimated currency undervaluation of up to 30%. From a broader institutional perspective, the EU’s trade decision-making mechanism is inherently predisposed toward 'slow motion.' Trade policy falls under the exclusive competence of the European Commission; national governments may provide 'political guidance,' but cannot issue direct operational instructions. This means that even if a summit yields the strongest possible rhetoric, von der Leyen must still complete an entire internal process—including legislative drafting, impact assessments, and stakeholder consultations—before turning paper-based 'new tools' into actual tariffs or quotas. Timelines are measured in months—or even years. And during that time, any shift in the political winds of a single member state could stall or reverse the entire process. Macron’s 'Two-Faced Strategy' Within the summit’s 'hawkish camp,' France stands out most prominently. As early as late May, France joined Italy, the Netherlands, and Lithuania in submitting a joint informal document ('non-paper') to the European Commission, calling for broadening the scope of safeguard measures, advancing WTO litigation, and reforming anti-circumvention provisions. This document had already circulated widely among diplomatic circles in Brussels in the days before the summit and was widely seen externally as the 'hawks’' pressure declaration. Even more striking was Macron’s public proposal—also in late May—for a 'European version of Section 301.' U.S. Trade Act Section 301 empowers the U.S. president to unilaterally impose tariffs upon determining that a trading partner engages in 'unfair trade practices'—a legal basis Trump is currently using to levy high tariffs on multiple economies worldwide. Macron’s message was clear: Europe needs a similar 'big stick'—one enabling the European Commission to swiftly and unilaterally impose restrictions once unfair trade practices are identified, rather than enduring today’s lengthy anti-dumping and countervailing duty investigation procedures. But how realistic is this proposal? Anyone familiar with EU institutional mechanics would answer: extremely limited. The EU is not a presidential federal government; von der Leyen is not Trump, nor is the European Commission the White House. Any new trade legislation requires joint approval from both the European Parliament and the Council of the EU—meaning the legislative process alone could take one or two years. Moreover, the EU already possesses an 'anti-coercion instrument,' specifically designed to respond to economic coercion—but it has never been deployed. The issue is not the absence of tools, but rather whether the EU dares—or is willing—to use them. This brings us to the other side of Macron’s maneuvering. Even as he loudly proclaimed that 'Europe needs its own Section 301,' France simultaneously advanced other diplomatic agendas. Macron recently hosted the G7 summit on June 15–16, attempting to chart a 'balanced course' between China and the United States. Danish Prime Minister Mette Frederiksen, though arriving at the summit with sharper rhetoric than Macron, bluntly stated: 'We are losing the technological competition'—and frankly acknowledged that the EU is falling behind in competitive advantage. Even the European People’s Party (EPP)—the largest political force within the EU—issued a strongly worded statement ahead of the summit, urging leaders to 'raise the rhetorical volume.'

von der Leyen: The EU’s trade deficit and dependency on China are unacceptable.

According to Eurostat data, the EU’s goods trade deficit with China reached €103.3 billion in Q2 2026—the second-highest level since the €107 billion peak in Q3 2022. Cumulative deficits for the first half of 2026 totaled approximately €201 billion, averaging over €1.1 billion per day. If this pace continues, the full-year deficit is likely to exceed €400 billion—surpassing the historical peak set in 2022. More notably, structural shifts are underway: On the import side, growth over the past five years has reached 45%. EU imports from China have continued expanding—from roughly €100 billion per quarter in 2021 to over €150 billion today. The fastest-growing categories have shifted beyond traditional electromechanical products to include new-energy vehicles, photovoltaic products, and batteries—high-end manufactured goods tied to green transition. On the export side, however, volumes have declined—not increased. Since Q1 2021, EU exports to the U.S. have grown by 36%, and exports to the rest of the world have also risen by 36%, while exports to China have fallen by 11%. This divergence is highly significant: global trade is expanding, yet European goods are increasingly failing to gain traction in the Chinese market. A frequently overlooked dimension deserves mention here: services trade. While the EU runs a large goods trade deficit with China, it maintains a persistent services trade surplus. In 2025, China’s services trade deficit with the EU stood at $48.3 billion—the largest such deficit China holds with any single partner. Intellectual property royalties alone account for over $10 billion annually paid by China to the EU. Thus, the full picture is this: Europeans spend heavily on Chinese physical goods, while Chinese consumers and firms spend substantially on European services and technologies—but the goods deficit vastly outweighs the services surplus. Beyond this, von der Leyen emphasized a truly telling signal: 'For the first time, all member states are running trade deficits with China.' Previously, China-related trade deficits were concentrated in certain countries. Although major manufacturing nations like Germany and France ran deficits, their exports of high-end machinery, automobiles, and chemical products offset much of those shortfalls. Nordic and Eastern European countries each had distinct profiles. Now, however, things have changed. Since 2026, all 27 member states—without exception—have recorded trade deficits with China. What does this signify? It signals that Europe’s comparative-advantage industries are being displaced—sector by sector—by Chinese products. The automobile industry offers the clearest illustration. German cars were once Europe’s flagship export to China—and a key pillar of Germany’s trade surplus. Today, the situation has reversed: Chinese new-energy vehicles are flooding the European market. From January to April 2026, EU imports of electric and hybrid vehicles from China reached €6 billion—a record high. Hybrid vehicle imports grew fastest, already surpassing battery-electric vehicles. Germany bears the brunt of this shock. Data shows that between April 2025 and April 2026, the EU’s overall deficit with China widened by €2.9 billion—with Germany alone accounting for €2 billion, nearly 70% of the increase. It’s not just automobiles. Solar panels, lithium batteries, energy storage systems, consumer electronics, industrial machinery—China’s manufacturing upgrade isn’t confined to isolated breakthroughs, but represents a systemic, value-chain-wide ascent.

EU will use all tools to cut China trade deficit, von der Leyen says

5 days ago

European Commission President Ursula von der Leyen stated the EU will use all tools to address its unsustainable trade deficit with China. She highlighted the need to secure critical minerals and rare earths by establishing a new European Corporation on critical raw materials.

reuters

2026-09-16

EU will use all tools to cut China trade deficit, von der Leyen says

EU will use all tools to cut China trade deficit, von der Leyen says

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