EU Leaders Weigh Tougher China Trade Measures Amid €1B Daily Deficit

EU Leaders Confront Record Trade Imbalance with China

European Union leaders are meeting today to discuss potentially tougher trade measures against China, as the bloc's trade deficit with Beijing has ballooned to a record €1 billion per day. The EU China trade deficit reached €360 billion in 2025, according to Eurostat data, with every EU member state recording a trade deficit with China. The gap hit €31.9 billion in April 2026 alone, driven by a surge of Chinese electric vehicles, solar panels, batteries, and chemicals flooding European markets at prices European manufacturers cannot match.

The European Council summit, taking place in Brussels, has officially listed 'global macroeconomic imbalances' on the dinner agenda — a diplomatic euphemism that deliberately avoids naming China directly, according to EU officials. Behind closed doors, however, leaders are debating how far they are willing to go to protect Europe's industrial base from what many describe as unfair competition fueled by massive Chinese state subsidies.

The Scale of China's Subsidy Advantage

According to an OECD report released in early 2026, Chinese companies receive three to eight times more state subsidies than firms in industrialized OECD countries. Roughly 60% of Chinese firms' global market share expansion since 2005 can be attributed directly to subsidies. In 2024, China accounted for 52% of $108 billion in global subsidies, concentrated in solar panels, semiconductors, steel, and aluminum.

Chinese exports to the EU have surged in sectors critical to the green transition. The 2025 EU anti-subsidy probe on Chinese EVs found that Chinese battery electric vehicle manufacturers benefited from subsidies ranging from 7.8% to 35.3% of their value, prompting the EU to impose countervailing duties in October 2024. Despite these tariffs, Chinese EV exports to Europe rose 26% in 2025. The European Commission has since opened a pathway for price undertakings, offering Chinese exporters a minimum import price and quota system as an alternative to duties.

Belgium Leads Calls for Action

Belgian Prime Minister Bart De Wever has emerged as one of the most vocal advocates for a tougher EU stance. In a letter to European Commission President Ursula von der Leyen, De Wever warned that China's economic policies are 'devastating our economy' and eroding Europe's industrial base. He cited a 20% increase in Chinese exports in early 2026, particularly in green technology, chemicals, and pharmaceuticals.

'The question is: are we prepared to endure the pain? My answer is yes,' De Wever wrote in his letter. 'We must make difficult choices in the short term regarding China to protect our industry, economy, and the well-being of our citizens in the long term.' Belgium's chemical industry has been particularly hard hit by Chinese competition.

French President Emmanuel Macron has also weighed in, stating earlier this year that 'China is strangling a large part of European industry.'

Divisions Among Member States

Despite the growing consensus that action is needed, EU member states remain deeply divided on how far to go. Countries with strong commercial ties to China — including Germany, Spain, and Greece — are reluctant to support aggressive measures that could provoke Chinese retaliation. The EU's dependence on China for critical raw materials adds another layer of complexity.

China controls 90% of global rare earth processing, 80% of tungsten, and 60% of antimony — materials essential for defence, EVs, and renewable energy. Over 80% of European firms depend on Chinese supply chains for these inputs. China has already demonstrated its willingness to use this leverage, having imposed export controls on rare earth elements in April and October 2025, with licensing approval rates for European companies falling below 25%.

In a sign of growing tension, China recently cancelled two diplomatic meetings without explanation, a move widely interpreted in Brussels as a warning against European trade action.

China's Response Capabilities

China has warned it will retaliate if the EU takes what it considers 'unfair' measures. Previous EU tariffs on Chinese EVs prompted Beijing to launch anti-dumping investigations into European dairy, pork, and cognac industries, resulting in hefty duties on European exporters. China Correspondent Gabi Verberg notes: 'Whether China will retaliate again depends on the impact of European measures. If the damage to Chinese industry is limited, China may do nothing. Ultimately, China's self-interest always comes first.'

Meanwhile, China has begun cutting export subsidies for solar panels and batteries starting April 2026, a move analysts interpret as a signal to Europe that Beijing wants serious trade relations. Export VAT rebates for solar panels have been cancelled entirely, while battery rebates are being phased out by January 2027.

What Measures Are on the Table?

The EU currently has several tools at its disposal. The European Commission can impose anti-subsidy and anti-dumping duties on products where unfair trade practices are proven. Multiple countries, including the Netherlands, want the Commission to strengthen the department that investigates such cases, enabling faster action.

Some EU countries want to go further, arguing the existing toolkit is insufficient. A recent EU trade defence measure targeting cheap Chinese steel inadvertently affected trading partners like Norway, Switzerland, and India. EU diplomats say future measures must be more targeted — for example, targeting products where a single country holds more than 40% market share.

The European Commission is also exploring whether to force companies in sensitive sectors to work with multiple suppliers, reducing vulnerability to economic coercion. The EU Critical Raw Materials Act aims to boost domestic supply and reduce dependence on China, but rebuilding independent supply chains could take 20-30 years, according to analysts.

EU Trade Commissioner Maroš Šefčovič has called the trade imbalance 'unsustainable,' while industry leaders warn of existential threats. Alexander Julius, president of Eurometal, warned that China is 'destroying the industrial backbone of Europe,' posing risks even to defence industries that rely on Chinese components.

FAQ

What is the EU's trade deficit with China?

The EU's trade deficit with China reached €360 billion in 2025, equivalent to roughly €1 billion per day. In April 2026 alone, the gap was €31.9 billion, according to Eurostat. Every EU member state recorded a trade deficit with China in 2025.

Why is the EU considering trade measures against China?

EU leaders argue that Chinese state subsidies give Chinese companies an unfair advantage, allowing them to dump cheap products — including EVs, solar panels, batteries, and chemicals — on European markets, undercutting local manufacturers and forcing factory closures.

What measures can the EU take?

The EU can impose anti-subsidy and anti-dumping duties, strengthen trade investigation capacities, introduce quotas on specific products, and require companies to diversify suppliers to reduce critical dependencies. The European Commission is also exploring targeted measures against products where one country holds over 40% market share.

How might China retaliate?

China has previously retaliated against EU tariffs on EVs by launching investigations into European dairy, pork, and cognac industries, resulting in high duties. China could also restrict exports of rare earth elements and other critical raw materials, where it holds near-monopoly control.

What is the outlook for EU-China trade relations?

Analysts expect incremental rather than dramatic change. The EU is divided between member states that favour tough action and those that prioritise maintaining trade links. The summit is expected to provide political guidance to the European Commission, with concrete measures likely to follow in the coming months.

Sources

• Guardian: EU trade deficit with China reaches record €1bn a day
• Reuters: EU leaders strive for unity on China trade imbalance
• EUobserver: EU leaders to pick from menu of anti-China trade measures
• Belga News: De Wever urges EU to harden stance on China's trade practices
• OECD report on Chinese industrial subsidies