Trading tensions between the European Union (EU) and China have grown in recent months as both European business associations and institutions have increasingly recognized the threat posed by the Asian nation to the continental economy and industrial system.
European companies and institutions are more and more worried about overcapacities in several Chinese industrial segments and consequent exports at very low prices into the EU.
While some European industrial segments have been negatively affected by China’s growth for decades, the problem worsened after the introduction of US tariffs in 2025, which diverted volumes from China and also other economies away from the US and toward Europe.
What before was seen as an issue of a singular industrial segment has now turned into a political problem.
On Monday June 29, European commissioner for trade Maroš Šefčovič met with China’s minister of commerce Wang Wentao in Brussels during the first meeting of the EU-China Trade and Investment Consultations (TIC).
The two ministers agreed on four initial workstreams, namely trade and investment balancing, export controls, intellectual property rights and World Trade Organization reform and agreed to meet again at the ministerial level in Autumn 2026.
“Both sides took note of the positive results to date of the EU-China Export Control Dialogue regarding rare earth elements and other critical materials and minerals and intend to strengthen dialogue in this field,” the ministers said in a joint statement on June 29. “The two sides discussed the value of continued exchanges of information on their respective regulatory frameworks and licensing policies. They acknowledged the need to strengthen the EU-China Export Control Dialogue and agreed on the need for further facilitation efforts aimed at maintaining the stability of global industrial supply chains.”
The meeting came after weeks of rising tensions between the two counterparts and at a time when consciousness regarding the necessity to intervene had built up in Europe.
At the end of May, European manufacturing association Aegis Europe, which includes associations and companies from the metals, ceramics and transportation industries, among others, wrote a letter to the European Commission president, Ursula von der Leyen, calling for “faster and more effective trade defense procedures, as well as the urgent allocation of additional human resources in the trade defense services of DG Trade in order to enhance the speed, effectiveness, and enforcement capacity of investigations.”
The association also urged the Commission to establish a new EU instrument specifically designed to address overcapacities and their disruptive consequences for European industries and value chains. According to Aegis, the instrument should be available on demand to any industrial sector affected by loss of market share due to overcapacities and other trade distortions, give competence to the Commission to act, allow for a full value-chain approach; and require respondent countries to demonstrate the absence of overcapacities, among other things.
The EU Commission implemented a similar plan in 2025 to protect the European steel industry from unfair competition.
Ahead of the European Council meeting of June 18-19, the association also wrote to the Council with similar requests, adding that EU institutions should consider improvement of the safeguard instrument and reform the voting system in safeguards procedures. “The current rule of a qualified majority voting only adds another obstacle to a procedure which already asks the concerned industries to meet very strict conditions,” Aegis wrote. “As done for the anti-dumping instrument, the voting rule should change in adopting a Commission proposal by simple majority and blocking a proposal from the Commission only by a qualified majority of votes. Allowing the EU industry to file a safeguard complaint would also streamline the procedures – rather than having to provide the data via Member States.”
According to media reports, the EU Council asked the Commission to create new trade instruments to deal with the industrial threat posed by China.
The Council’s conclusions did not mention such a request, which was also not confirmed to Fastmarkets.
Nevertheless, a spokesperson for the Council confirmed that the topic of geoeconomic imbalances, especially with China, has become increasingly important in recent weeks – it has already been discussed at different levels within the Council, and it has become an item of discussion both at the Foreign Affairs Council and at the Trade Policy Committee.
“At the moment there are no proposals on the table, but it’s an issue that is currently being addressed,” the spokesperson told Fastmarkets on Monday June 29.
Following the June Council, von der Leyen said the EU had good discussions at the G7 earlier that week, as well as a productive discussion during the Council on structural overcapacities and the effect on global imbalances.
She highlighted how, over the past five years, imports from China into the EU have increased by 45% and that the EU recorded its largest-ever trade deficit with China – €360 billion ($410 bln), in 2025. “This is not just about cheap imports,” she said in a statement on June 19. “We see overcapacities that erode our own manufacturing base. And this is simply not sustainable. We know that we must do our homework to boost our own competitiveness. But we also have to address the global imbalances.”
Von der Leyen said discussions showed clear support for continuing the path of diversification and derisking the EU’s trade relationships. “I am pleased that we saw clear support for a European response based on unity among Member States and dialogue with China, which remains crucial. The Commission will take this forward. And the topic will remain high on our common agenda,” she said.
According to media reports, Wentao threatened the EU with retaliatory measures in case the EU would unilaterally introduce new trade instruments and impose discriminatory restrictions.
