Germany and France make tough proposals: Block China from entering the EU market if necessary

First draft 10-06 22:59

Update time 10-07 06:42

Germany and France advocated heavy blows to counter China's economic agreement and, if necessary, prevent it from entering the European market. (AFP)

[Compiled by Wei Guojin/Taipei Report] On the eve of the upcoming trade negotiations between the EU and China, Germany and France urged the EU to use new trade weapons when necessary, including immediately cutting off China or other countries from entering the European single market to counter economic coercion such as its implementation of export controls on key rare earths.

The German-French initiative represents a significant shift in stance for Berlin, which has Europe's largest economy struggling with an influx of cheap electric cars from China and U.S. tariffs.

Please read on...

German Chancellor Merz and French President Macron sent a letter to European Commission President von der Leyen on Monday, calling on "the EU to have a credible tool to respond decisively and systematically; to use strong measures when necessary, the most severe ones can immediately block its access to the internal market."

Although the letter did not explicitly name China, the EU is seeking ways to rebalance EU-China trade relations. EU Trade Commissioner Maros Sefcovic will go to Beijing this week for two days of talks with Chinese officials, and EU member states leaders will also hold a summit in Brussels next week to discuss the trade imbalance with China.

The letter urges the EU to expand its trade toolbox to address the growing "weaponization of trade, systemic market distortions and global macroeconomic imbalances." This includes building a "robust tool" that can be quickly activated when faced with critical supply constraints.

Analysts believe that the above call is in response to Beijing's export controls on rare earths and magnets last year, which forced some European auto suppliers to suspend work and production due to shortages of related materials.

In addition, the letter also urges an investigation into the overall industries such as chemicals, plastics, and gasoline-electric hybrid vehicles to clarify whether they are facing unfair competition from highly subsidized imports and take a proactive response. The investigation could lead to new tariffs. Similar investigations in the EU currently focus on specific products rather than the industry as a whole.

German officials said the proposal aimed to give the EU tools similar to U.S. Section 301, which provides governments with broad discretion to impose tariffs on trading partners.

German Chancellor Merz said, "We want to give the European Commission the power to act quickly when necessary. The shortcoming of European trade policy in recent years is that it takes a long time to make decisions."

"This is a watershed moment for Germany," said Sander Tordoir, chief economist at the Center for European Reform. "Berlin is no longer naïve about China's trade and industrial policy war on its industries, and the currency manipulation that has powerfully facilitated this."

Grasp the economic pulse with one hand. Click here to subscribe to Free Finance Youtube Channel