The European Commission is not prepared for a trade war with China

Brussels. This week, Ursula von der Leyen claimed another success in her trade diversification strategy in response to Donald Trump’s tariffs. The Commission President announced a breakthrough in negotiations with the Philippines, which is expected to lead to the conclusion of a free trade agreement within a few weeks. Following Mercosur, Mexico, Australia and Indonesia, the EU has found yet another rapidly expanding market for its exports. However, trade diversification does not resolve the most serious challenge facing Europeans. China, with which the EU runs a trade deficit of one billion euros a day, poses a threat not only to European industry but also to its social and political model. October is set to be the decisive moment. But von der Leyen has not yet chosen between dialogue and a firm stance towards China. 

Whilst the Commission has demonstrated its success in negotiating and concluding free trade agreements, it is not equipped to wage trade wars. This week, a group of Commission officials travelled to Beijing to hold talks on rebalancing trade relations. Following a discussion with heads of state and government at the European Council in June, von der Leyen announced the launch of a dialogue with Beijing that must “yield results” by October. The officials’ mission is intended to prepare for a visit by Trade Commissioner Maros Sefcovic to Beijing on 8 and 9 October. It is on that occasion that the Commission hopes to see the first results. But so far, there have been none. The EU’s trade deficit with China has exceeded one billion euros a day: 103 billion in the second quarter of 2026, following 100 billion in the first quarter, according to Eurostat.

For almost three years, Chinese exports to the EU have continued to grow, whilst European exports to China have been falling slowly. The Chinese products showing the most significant increase are machinery and cars. Sefcovic acknowledged that the stakes in his talks with Beijing go beyond trade. “The debate on trade relations with China goes far beyond the traditional discussion on the trade balance. It is essential to make clear that, given the scale of the deficit, the speed at which it is growing and its impact on key economic and industrial sectors in the EU, we are talking about the future of our economy, our industry and the European social model,” he said on 22 September: “This is a highly political issue: what we need is a political breakthrough and a genuine understanding.” Sefcovic is hoping for “credible results”, but even he does not seem to believe in them. So far, Commission officials have not detected any real willingness on China’s part to agree to the EU’s demands, neither on curbing exports nor on granting greater access to the Chinese market.

Within the Commission, Sefcovic is an advocate of dialogue with China. The other commissioners follow the line taken by their national governments. France’s Stéphane Séjourné argues for a tougher approach. Spain’s Teresa Ribera does not want to create barriers. Von der Leyen’s stance swings in line with Berlin. When Chancellor Friedrich Merz, under pressure from one section of industry, calls for new tools to defend against Beijing’s unfair practices, the Commission President adopts a hawkish tone. When the Minister for the Economy, Katherina Reiche, who represents another section of industry, says that cooperation with China is needed, von der Leyen returns to prioritising dialogue. The Commission President will report on the outcome of the dialogue with Beijing to the European Council in mid-October. The 27 member states are divided. In an interview with Bloomberg, Spanish Prime Minister Pedro Sánchez argued for the need to “cooperate with China” and “manage our differences” over the trade deficit. France favours a tough stance to reduce Chinese exports to the EU and has asked von der Leyen to develop new tools to help businesses diversify their supply chains and to help member states cushion the impact of retaliatory measures. However, the proposals are not expected to materialise before the end of the year.

“The Commission ‘can manage free trade agreements, World Trade Organisation rules and dumping practices, but it cannot manage an overarching strategy’,” a European diplomat explains to Il Foglio. As in the negotiations with Trump over tariffs, von der Leyen is more afraid of the short-term consequences of Chinese retaliation than of the long-term effects on the EU of the growing trade deficit. Consequently, the Commission is increasingly turning to regulation – such as the Industrial Accelerator Act or the new procurement rules – in an attempt to keep Chinese products out of the EU through ‘European preference’. But even ‘Made in Europe’ has its drawbacks. The level of red tape is increasing. More and more allied countries, such as Canada, the United Kingdom and Switzerland, are complaining about the risk of being excluded from the EU market. Ukraine has had barriers imposed on its steel exports due to a measure adopted to tackle Chinese overcapacity. Yesterday, the Financial Times revealed that Andy Burnham’s government has been asked by the Commission to raise tariffs on Chinese cars if it wishes to avoid the barriers posed by the ‘Made in Europe’ policy.