EU says ready to use all trade tools to defend against China

The European Union is prepared to deploy all the tools available to defend its economies if China fails to offer fair access to its markets, European Commission President Ursula von der Leyen said.

She added that heavily subsidized Chinese products such as electric vehicles and steel are flooding the European market and said the world cannot absorb China’s surplus production.

Von der Leyen spoke after talks in Paris on Monday with French President Emmanuel Macron and Chinese President Xi Jinping, who is on a state visit to France before heading to Serbia and Hungary in his first trip to the bloc in five years.

“For trade to be fair, access to each other’s market also needs to be reciprocal,” she said. “We discussed how to make real progress on market access. I remain confident that more progress can be achieved. At the same time, we stand ready to make full use of our trade defense instruments if this is necessary.”

She cited the example of the International Procurement Instrument created in 2022 and which was used for the first time last month to launch a probe into China’s sourcing of medical devices. Brussels could ultimately restrict Chinese access to tenders if it finds a lack of reciprocity.

“Europe cannot accept market-distorting practices that could lead to deindustrialization,” von der Leyen said.

The EU is becoming tougher on trade relations with China, echoing US concerns about state-fueled overcapacity in green industry. The rhetorical shift was already put into practice when the EU launched an investigation into subsidies for Chinese electric vehicles in the fall of 2023 that could see new tariffs introduced by July. Its also scrutinizing other industries like wind energy, solar and railways.

China for its part has denied generating overcapacity and accuses the EU of protectionism.

France has been a key champion of the EU’s firmer approach. In a speech last month laying out his vision for Europe’s future, Macron called for the EU to do more to echo subsidies in the US and introduce preferences for its homegrown industry in strategic sectors including artificial intelligence and green tech.

French Finance Minister Bruno Le Maire has said the changes mark an end to the era of “happy globalization” and that the EU must now show its teeth with more tools to re-balance trade with China.

China hasn’t stood idly by as Europe becomes more assertive. In January, Beijing launched an anti-dumping investigation into liquor products, a move that could hurt France’s cognac producers disproportionately. Producers called for a deal to resolve the issue during Xi’s visit, warning that the beverage represents 70,000 direct and indirect jobs in France.

The Chinese leader also rebuffed pressure from German Chancellor Olaf Scholz on a trip to China last month to reduce what Western officials see as excess manufacturing capacity.

Von der Leyen said she encouraged the Chinese government to address “structural overcapacities” as China “continues to massively support its manufacturing sector” while domestic demand fails to grow.

“A China that plays fair is good for all of us,” she said. “At the same time, Europe will not waver from making tough decisions needed to protect its economy and its security.”

Moments before Xi arrived at the Elysee Palace on Monday, Le Maire signed a pact with France’s auto sector that seeks to safeguard and ramp up production of EVs on French soil. That includes commitments to continue limiting cash support for consumers to vehicles with the lowest environmental footprint — a move that de facto excludes many Chinese EVs. 

Yet with Xi’s visit, Macron is also seeking to balance frictions with friendliness as France looks to lure Chinese investment it needs to bolster its domestic car industry.

Speaking alongside representatives from the French auto sector, Le Maire said the government is in favor of China’s BYD Co. opening plants in France, as Japan’s Toyota Motor Corp. has in the past.

“BYD is welcome in France and the Chinese auto industry is welcome in France,” he said.

Von der Leyen added that she and Macron urged Xi to use his influence over Russia’s Vladimir Putin to end the war on Ukraine, adding that China’s stance on the conflict is affecting relations between Beijing and the EU.

She also said China can help limit Iran’s missile and drone proliferation.