EU leaders weigh tougher measures to combat China trade imbalance

BRUSSELS, June 19 ------ European Union leaders debated new and tougher measures 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 agreed it needs to go further, diplomats said. They asked the European Commission, which oversees the bloc trade policy, to produce results from dialogue with the EU's main trading partners and to ensure the bloc has all the instruments it needs to defend its interests, an EU official said.

There is less unity 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. 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."

Source: reuters.com