Chinese overproduction is increasingly flooding the European market with cheap goods, and Beijing’s restrictions on critical raw materials have shown how Europe’s dependencies can be used as economic leverage. After years of trying to make the relationship work without confronting its risks, EU governments are now running out of room for compromise – and moving closer to trade restrictions.
The numbers explain much of the change. The EU’s goods trade deficit with China reached around €360 billion in 2025 – roughly €1 billion every day – and has continued to grow this year. Chinese exports are surging as weak domestic demand pushes producers towards foreign markets, including in sectors such as electric vehicles, semiconductors, chemicals and machinery. European manufacturers are increasingly struggling to compete.
This has fuelled warnings of a second “China shock”: a repeat of the large influx of Chinese imports that transformed the United States’ industrial strongholds after China joined the World Trade Organization in 2001. At the same time, Europe remains heavily dependent on China for critical materials, including more than 80% of several critical raw materials and 90% of some rare earths. Beijing’s export restrictions have demonstrated the vulnerability that comes with those dependencies.
What is changing now is the political response.
France has long pushed for stronger trade defences, while Germany – whose industry is deeply connected to the Chinese market – traditionally urged caution. That gap is narrowing. President Emmanuel Macron and Chancellor Friedrich Merz have tasked their governments with developing a joint Franco-German roadmap on Chinese trade practices, while Merz has acknowledged that the growing imbalance is coming “at the expense of our industry.”
The shift extends beyond Europe. At this week’s G20 finance ministers’ meeting, every participant except China backed action against “non-market” policies that create persistent trade imbalances and excessive dependence on exports.
The European Commission is therefore preparing for the possibility that dialogue fails. Commission President Ursula von der Leyen has warned that talks with Beijing must produce results. Trade Commissioner Maroš Šefčovič says Brussels wants “tangible results” by October. The Commission is examining stronger safeguards against sudden import surges and developing a new instrument intended to diversify European supply chains away from China.
That does not necessarily mean sweeping tariffs. Quotas, safeguards, faster trade-defence investigations and restrictions targeted at particular sectors may prove more politically feasible. The EU still wants China to voluntarily curb some exports while opening its market further to European goods.
But tougher European measures would come with consequences. Germany and other capitals have repeatedly worried about Chinese retaliation, as Beijing has already shown its willingness to restrict critical-material exports in response to foreign trade measures.
The European Commission appears to be preparing for a considerably more confrontational economic relationship. They better be ready.
