Due to the growing foreign trade deficit, economic dependency, security and deindustrialization concerns, the European Union (EU) is seeking to review its economic and commercial relations with China and place them on a new basis where economic and commercial protection instruments are put into effect.
Delegations led by Chinese Minister of Commerce Vang Vintao and EU Commissioner for Trade Maros Sefcovic will meet in Beijing today for the second round of EU-China Trade and Investment Consultations.
In this context, the delegations met for the first time in Brussels on June 30, and at the meeting, four areas of work were determined: ensuring the trade and investment balance between the parties, export controls, intellectual property rights and World Trade Organization (WTO) reform, and it was decided that the second round of negotiations would be held in the autumn.
With the draft Industrial Acceleration Law announced in March, the EU is taking steps to strengthen the industrial production of the continent against the danger of unilateral foreign dependency and deindustrialization in the economy, especially in China. The bill aims to preserve and increase industrial capacity in key sectors, with rules of origin in public tenders and incentives for local producers.
The Chinese side, on the other hand, thinks that the bill in question and the further protectionist measures planned by the EU will create an investment obstacle for Chinese companies and lead to systematic discrimination.
The fact that the leaders of France and Germany wrote to the EU Commission earlier this week, calling for the introduction of new trade protection instruments, including cutting market access, shows that China and the EU have come to a crossroads in trade and economic relations.
Increasing foreign trade deficit
It is observed that there has been an increasing gap in goods trade between the EU and China against Europe in recent years.
While the trade deficit between the parties was approximately 150 billion in 2015, it has more than doubled in 10 years. Moreover, the fact that most of the imports from China are cheap manufacturing industry products has become a threat to the industrial basis of Europe.
According to the data of the EU Commission, the trade deficit, which was 304.5 billion dollars in 2024, increased to 359.8 billion dollars in 2025. During this period, the EU's imports from China increased by 6.4 percent, while its exports to China decreased by 6.5 percent.
In 2025, 97.3 percent of the products imported from China were manufacturing industry products. European countries imported electrical-electronics worth $164.9 billion, machinery and equipment worth $106.5 billion, organic chemicals worth $34.1 billion, motor vehicles worth $29.9 billion, and furniture and lighting products worth $21.3 billion from China.
The fact that Chinese manufacturers are rivals in their own market in areas where European industry competes in the world, such as electronics, machinery, automobile and chemical industries, raises concerns about economic security and deindustrialization on the continent.
"Second China shock"?
In her State of the Union speech at the European Parliament in September, EU Commission President Ursula von der Leyen said, "Some talk about the 'second China shock' approaching. This is already happening." he said.
According to Europeans, the main reason for this is the unfair trade and industrial policies created by China with the support and incentives provided by the state, especially in critical industries. It is pointed out that in this way, the Chinese industry creates excess capacity for export by producing on a scale that exceeds the amount that meets domestic demand, thus filling the global markets with cheap manufacturing products.
The first economic shock, called the "China shock", occurred in the second half of the 1990s and the early 2000s, when cheap steel products created by state subsidies in China invaded the global market, and resulted in the liquidation of iron and steel industries in many countries, from developed countries to emerging economies.
European countries do not want to experience a second "China shock" that would damage national industries. Concerns are growing that China's trade practices that violate fair competition are leading to the deindustrialization of Europe.
Trading hedging instruments
So much so that even Germany, which previously opposed the EU's protectionist measures against China and took an unfavorable stance in the discussions regarding the imposition of additional customs tariffs on electric vehicles in 2024, is signaling that it has changed its position.
In their joint letter to the EU Commission, French President Emmanuel Macron and German Chancellor Friedrich Merz called for the introduction of new trade protection instruments, including cutting market access.
Decision-makers in Brussels plan to develop a number of new trade protection instruments, in addition to the measures to protect and strengthen industrial production in the draft Industrial Acceleration Bill announced by the Union in March.
Among the suggestions, a diversification tool that obliges European producers to supply from at least 3 different countries against the danger of economic dependency in critical sectors, a solidarity fund to protect European producers against retaliation from China or other countries, and giving the EU Commission the authority to impose tariffs similar to the authority given to the American government by Article 301 of the US Trade Act are discussed.
On the other hand, it is noteworthy that Macron and Merz's letter demands a mechanism that can implement systematic and decisive reactions to economic pressures, including the immediate cut off of access to the European market, with rapid decision-making processes.
China's reaction: Let's not get into a trade war
China warns that the measures implied in both the EU's Industrial Acceleration Law and the joint letter of France and Germany will create unfair competition and systematic discrimination for Chinese companies and trigger a trade war between the parties.
In its statement published on April 27 about the Industry Acceleration Law, the Chinese Ministry of Commerce emphasized that the regulations in the draft law, which provide priority and provide incentives to "EU origin" products in public tenders in emerging strategic sectors including batteries, electric vehicles, solar panels and critical raw materials, will be restrictive for foreign investments, including those of China, and will constitute an "investment obstacle" and "systematic discrimination".
In the statement, it was pointed out that the regulations in the draft law are contrary to the "most favored nation" principle of the World Trade Organization (WTO), which prohibits discrimination between member countries, and the "national treatment" rule, which requires foreign companies to compete on equal terms with domestic companies in the national market, and that the regulations in question would violate the provisions of the WTO agreements.
On the other hand, in his telephone conversation with his German counterpart Johann Wadephul on September 22, Chinese Foreign Minister Wang Yi pointed out that China and the EU should jointly defend multilateralism and free trade against the current effects of the anti-globalization trend and said, "China and the EU are comprehensive strategic partners, they should not engage in a trade war." he said.
In the statement made by the Chinese Ministry of Commerce regarding the letter submitted by France and Germany to the EU Commission, the following was noted:
"Protectionism does not strengthen competitiveness, economic decoupling and cutting supply chains serve no one's interests. We hope that France and Germany, as the world's major economies, will remain committed to the principles of openness, cooperation, free trade and WTO rules, and will not encourage the EU to resort to protectionist tools at every stage by politicizing economic and trade issues, overextending the boundaries of the concept of security."
The EU delegation will inform the country's leaders at the EU Council Summit to be held next week after two days of consultations in Beijing. The new trade protection instruments are expected to be put into effect in December, depending on the agreement reached here.
