The European Union and China are standing at a critical juncture, with tensions threatening to spill over into a full-blown trade war. A recent editorial from China's state-run Global Times warning the EU against such a conflict underscores the gravity of the situation as Brussels prepares to debate tougher trade measures.
The current friction didn't appear overnight. It's rooted in clear economic data that has alarmed European policymakers. For years, the EU has faced a massive trade deficit with China, which swelled to nearly €360 billion in 2025. More recently, the rapid market penetration of Chinese electric vehicles (EVs) has become a major flashpoint. Chinese EV brands saw their market share in Europe climb to record highs, raising concerns about the future of Europe's own automotive industry.
This economic pressure has triggered a clear chain of events. First, the stark data on the trade imbalance and EV market share gave ammunition to more hawkish EU member states. Second, countries like France, Spain, and Italy began to publicly demand faster and broader trade defense instruments to protect their industries. Third, this political momentum pushed the European Commission to schedule a high-stakes meeting on May 29 to formally discuss overhauling its trade toolkit, potentially adopting more aggressive, U.S.-style measures.
In response, China has adopted a dual strategy. On one hand, Chinese companies like BYD and Xpeng are accelerating plans to build factories in Europe. This localization strategy aims to bypass tariffs and embed themselves within the European market. On the other hand, the Chinese government has issued increasingly sharp warnings. The Global Times editorial was a direct message to Brussels, making it clear that Beijing is prepared to retaliate forcefully if the EU proceeds with what it views as protectionist measures.
Ultimately, the upcoming EU meeting represents a crossroads. The decisions made there will determine the next chapter of EU-China trade relations. The key question is whether the EU will opt for a path of managed competition, using targeted tools to address specific issues like overcapacity, or if it will unleash a new set of powerful, cross-sectoral weapons that could trigger a costly and damaging trade war.
- Trade Defense Instruments: Tools used by governments to protect domestic industries from what they see as unfair foreign competition. Examples include tariffs (taxes on imports), anti-dumping duties (levied on goods sold below their home market price), and countervailing duties (to offset foreign government subsidies).
- Overcapacity: A situation where an industry's potential production of a good is greater than the actual demand for it. This can lead to companies exporting goods at very low prices, which can harm industries in other countries.
- De-risking: A strategy focused on reducing dependencies on a single country for critical goods or materials, without aiming for a complete economic separation (decoupling).