EU trade chief heads into China talks hobbled by internal divisions

Monday's meeting (29 June) between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Maroš Šefčovič in Brussels has been described by EU officials as a make-or-break event for the future of Europe's trade with the manufacturing superpower.

China's oversupply and low domestic consumption represent "an imbalance that the world just cannot digest," outgoing EU trade negotiator Sabine Weyand told MEPs in the lead-up to the talks.

Proposed Trade Instruments

Šefčovič's office had drafted plans for an 'overcapacity' instrument that would allow the EU to impose new tariffs on a range of Chinese industrial goods and introduce import limits.

His officials have also proposed a 'diversification' instrument that would require European companies to diversify supply sources in critical sectors, aiming to reduce industrial dependency on China.

However, momentum for enacting these measures appears to have stalled.

Diplomatic Setbacks

Although a video conference on 'global economic imbalances' was held with China ahead of the French-hosted G7 summit last week, officials in Beijing cancelled several meetings with EU counterparts that had been intended to prepare the ground for the Wang-Šefčovič talks.

At last week's EU summit in Brussels, national leaders were notably restrained in their remarks on China.

These developments appear to have delayed progress on the new 'overcapacity' and 'diversification' instruments until autumn.

Divisions Among EU Member States

The divisions between EU capitals have been evident from recent visits to Beijing by national leaders, including:

• France's Emmanuel Macron (December 2025)
• Spanish Prime Minister Pedro Sánchez (April 2026)

Dialogue

The latest EU delegation to China is a five-day visit by Austria's Foreign Minister Beate Meinl-Reisinger, which began on Monday (22 June). Austria is considered a moderate voice on China within the EU.

"We want to remain in dialogue with China," Austrian Chancellor Christian Stocker said at last week's EU summit, adding that "it is too early to talk about [defensive] measures."

Similar remarks came from Dutch Prime Minister Rob Jetten, who told reporters the EU needed to "invest much more in new technology and innovation in the coming years, strengthen European companies, and also be critical of the imbalances in the global economy and address them."

France, by contrast, has led calls for stronger tools to contain China's overcapacity and market-distorting subsidies.

Economic Data and Concerns

According to a paper by the Centre for European Reform (CER) — cited by commission officials in recent weeks as evidence of the urgency of the crisis posed by Chinese oversupply — China now accounts for roughly 30 percent of global manufacturing output, while consuming only 13 percent.

Officials say this is driving Europe's growing trade deficit with China, which:

• Amounted to €360 billion in 2025
• Is projected to reach €400 billion in 2026, based on the first five months of the year

Meanwhile, 55 percent of European manufacturing is exposed to Chinese market-share gains in the coming years, driven in part by what CER estimates as a 30 percent undervaluation of China's currency, the renminbi, offering an unfair advantage over foreign competitors.

Shift in Germany's Position

The most notable change in attitude toward Chinese trade across European capitals has been in Germany, whose trade deficit with China — at more than €90 billion — is the largest in the EU.

In his press conference at the EU summit on 19 June, German Chancellor Friedrich Merz told reporters that the EU could "fully accept if productivity ... is higher [in China] than in Europe," and welcomed China's rapid technological progress.

However, Merz added: "But when it comes to naked flooding of markets, and when there is systematic subsidisation into overcapacity — and when all this is accompanied by a currency that is not freely convertible, that does not ultimately participate in capital markets because the capital market is sealed off — then these are competitive distortions that we do not simply want to accept."

Mixed Reactions

Czech Prime Minister Andris Babiš described trade developments with China as "dramatic," following EU Commission President Ursula von der Leyen's presentation on macroeconomic imbalances at the summit dinner.

These conflicting views leave the European Commission facing significant challenges in forging a unified trade policy toward China.