EU leaders weigh tougher measures to combat China trade imbalance

BRUSSELS - European Union leaders were set to debate new and tougher measures on Thursday that could be needed to curb the bloc's growing trade deficit with China and its heavy reliance on the world's second-largest economy for rare earths and other critical supplies.

EU diplomats say there is a gradual convergence of views among the 27 EU members that there is a problem with the goods trade deficit with China, which now amounts to some €1 billion ($1.15 billion) per day. The situation is more critical as transatlantic tariffs diminish access to the U.S. market.

Luxembourg Prime Minister Luc Frieden said he favoured dialogue with China, while insisting that trade relations had to be fair and not "a one-way street".

China's goods trade surplus with the EU hit €360.6 billion in 2025, a 15% increase on 2024, and has expanded by 10% in the first four months of this year as Chinese firms have sold more to the EU and imported less.

Beijing has also exploited its dominance in processing of critical minerals by placing export restrictions on rare earths in April 2025, a response to U.S. President Donald Trump's tariffs that has also hit EU companies.

"We live in a world of wolves now. We no longer live in a world of pink ponies and rainbows," said one EU diplomat.

AGREEMENT ON EU'S CHINA PROBLEM, SPLITS OVER RESPONSE

Keenly aware it needs to diversify its trade, the European Union has concluded multiple mineral partnerships and free trade deals with Australia, India and Indonesia in the past year.

EU leaders at a summit in Brussels are likely to agree it needs to go further, diplomats say. They are expected to ask the European Commission, which oversees the bloc's trade policy, to engage with China while bolstering EU trade defences.

There is less unity, however, on how this should be done. Countries like France advocate for a tougher line, while Germany, the EU's biggest exporter, and Spain, increasingly home to Chinese investments, are more cautious.

"I'm not sure that we can get to an agreement," Dutch Prime Minister Rob Jetten said before the summit. "But it's good to have an open conversation on, on the one hand, the disbalance in trade with China and, on the other hand,... on how to boost the competitiveness of the European Union itself."

The split was exposed last month when France, Italy, the Netherlands and Lithuania said in a joint paper the EU should look into a new measure to limit over-reliance on single foreign countries, possibly with additional duties or quotas to protect domestic producers.

Spain had initially been listed as a signatory, but then publicly distanced itself from the paper.

"We need friends, we need balanced relationships," Spanish Prime Minister Pedro Sanchez said on Thursday before the EU leaders' discussion. "We need to be pragmatic, and we need to build bridges both with major economies – potential allies such as China – and traditional allies, such as the United States."

EU trade defences are already focused on China. Of 21 new anti-dumping and anti-subsidy investigations, 18 target Chinese producers. The bloc has also imposed additional duties on imported electric vehicles made in China since 2024, sparking Chinese retaliation on EU dairy products and brandy.

Critics say the EU needs to speed up investigations and prioritise cases, rather than handling them purely on a first-come-first-served basis. They also argue the cases are too narrow in scope and say Chinese producers can often overcome tariffs.

The Commission said Chinese EV imports did fall following the tariffs, but Chinese producers simply shipped more hybrid vehicles instead. EV imports have also rebounded in the first quarter of this year.

The EU executive is due to conduct a broad review of trade defences in the third quarter and has mooted potential new measures to tackle overcapacity and overreliance on single suppliers - notably China. For sensitive sectors, EU companies may be required to find three possible sources. ($1 = 0.8689 euros)

(Reporting by Philip Blenkinsop; Additional reporting by Andrew Gray, Charlotte Van Campenhout, Ingrid Melander, Anna Koper and Javi West Larranaga; Editing by Joe Bavier)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 18, 2026 at 1:34 PM.