EU leaders to seek urgent new trade tools against China

EU leaders will meet in Brussels on Thursday and are expected to instruct the European Commission to "urgently" develop new tools against imbalances they blame on China's economic policies. The instruction appears in a draft summit statement that the 27 member states are still negotiating, according to the South China Morning Post.scmp

The summit comes a week after the EU and China reached a preliminary deal in Beijing to limit Chinese hybrid car imports. Officials in Brussels say the deal is a start but does not go far enough. "One swallow does not make a summer, but it's a first result and the start of a process to get China to moderate its exports," a senior diplomat told the Post.scmp

A widening deficit

Reuters reported that leaders will open Thursday's two-day meeting by discussing whether the hybrid deal is a good enough first step to keep negotiating a broader trade understanding with China, or whether tougher restrictions are needed. The EU's goods deficit with China reached €360 billion last year and was already €200 billion in the first half of 2026. Commission President Ursula von der Leyen has called that deficit "unsustainable".usnews

Under the deal, Chinese hybrid and plug-in hybrid imports would be capped at 350,000 a year, possibly starting as early as December. An EU official said Chinese shipments had been on track to reach about 800,000 this year. Vehicles above the quota would be blocked outright rather than charged extra tariffs. Trade Commissioner Maros Sefcovic called the deal a "very good result" but said it was only a first step.axios+1

A 'kill switch' and a German U-turn

Last week, German Chancellor Friedrich Merz and French President Emmanuel Macron wrote jointly to von der Leyen asking for a new tool that could cut a trading partner off from the EU's single market if unfair practices continue. China's Commerce Ministry warned that Europe would "suffer the consequences" if it adopted such a "kill-switch" plan.dw

The Franco-German paper also called for urgent measures on imports of chemicals and PET plastic, and for limits on companies relying on a single source for critical supplies. Reuters reported that the Commission is likely to propose the first such measure in December.usnews

The joint paper is a reversal for Berlin, which opposed EU tariffs on Chinese electric vehicles in 2024. Germany's carmakers are under strain: imports of new Chinese-made cars into Germany rose 121% in the first seven months of the year, according to federal statistics agency Destatis. Volkswagen is cutting 100,000 jobs. Noah Barkin of Rhodium Group told DW that Merz and his advisers are now convinced "the benefits of action outweigh the costs of inaction".dw+1

Divisions remain

Spanish Prime Minister Pedro Sanchez has pushed for a softer line on Beijing, as Spain welcomes Chinese investment. He faces a snap election on November 29. Daniel Mullaney, a senior fellow at the Atlantic Council, told Axios that the hybrid deal could make member states "hesitant this week to rock the boat". Economist Michael Pettis argued that the deal would help European hybrid makers "at the expense of other EU manufacturers".axios+1