Key facts
- EU leaders are meeting in Brussels to discuss trade relations with China.
- Surging Chinese exports of cars and manufactured goods threaten European industry and jobs.
- The EU's trade deficit with China reached €360 billion last year.
- Germany has shifted its stance on EU tariffs for Chinese electric vehicles.
- French President Emmanuel Macron faces domestic political challenges.
- Spanish Prime Minister Pedro Sanchez faces an upcoming election with his party trailing in polls.
European leaders are convening in Brussels for a two-day summit starting Thursday to deliberate on the future of trade relations with China. The discussions are driven by concerns over China's rapidly increasing exports of cars and other manufactured goods, which are seen as a threat to European industries and a potential cause of widespread job losses.
Beyond trade with China, the summit agenda includes critical issues such as the ongoing conflict in Ukraine, with specific mention of a diesel deal between U.S. President Donald Trump and Russia. Other topics on the table are the Middle East situation, defense strategies, migration policies, the European Union's long-term budget, and the expansion of the 27-member bloc.
For several European leaders, the summit offers a potential respite from domestic political pressures. French President Emmanuel Macron is contending with student protests and significant bond market losses stemming from a budget deadlock. German Chancellor Friedrich Merz faces challenges in stabilizing his coalition government following regional election defeats. Spanish Prime Minister Pedro Sanchez is currently trailing in opinion polls ahead of an upcoming election.
Across the continent, mainstream political parties are experiencing increased pressure from far-right and nationalist movements. This trend is partly fueled by a public sentiment that the economy is not generating sufficient wealth to sustain expected levels of public services. The dual pressures of inexpensive Chinese imports and elevated U.S. tariffs are further straining Europe's industrial sector, leading to job cuts, such as the 100,000 positions at risk at Germany's Volkswagen.
In response to the growing trade imbalance, EU leaders will consider whether a preliminary agreement with Beijing to curb the influx of hybrid car imports is a sufficient starting point for further negotiations, or if more stringent restrictions are warranted. Franco-German proposals have been put forward to address the substantial goods deficit with China, which reached €360 billion ($402 billion) last year and stood at €200 billion in the first half of 2026. European Commission President Ursula von der Leyen has described this deficit as 'unsustainable' and pledged to utilize all available means to reduce it.
The European Commission's focus has shifted from enhancing market access for European firms in China to limiting Chinese imports into the bloc. Trade deficits are prevalent across various sectors, including machinery, textiles, basic metals, chemicals, and automobiles. European Trade Commissioner Maros Sefcovic characterized the recent EU-China deal as a 'very good result' but emphasized it is merely an initial step toward rebalancing trade.
While EU leaders are likely to encourage continued dialogue with Beijing, they will also assess the necessity of further measures. A senior Commission official indicated that dialogue alone may not be sufficient to achieve the desired rebalancing. The Franco-German paper highlighted an urgent need for actions concerning imports of chemicals and PET plastic, and also called for measures to reduce corporate dependence on single-source suppliers for critical materials and to retaliate swiftly against countries that harm the bloc.
The Commission is expected to propose its first such measure in December, regardless of the leaders' decision this week to continue discussions with China. Notably, Germany's position marks a significant shift; just two years ago, it opposed EU tariffs on Chinese electric vehicles, but now aligns with France's protectionist stance. Sander Tordoir, chief economist at the Centre for European Reform, noted the significance of this policy switch in Berlin and the alignment between Germany and France on addressing the 'second China shock.'
French President Macron, having lost his parliamentary majority in 2024, views European policy as a key avenue to exert political influence and shape his legacy before his presidential term concludes next year. Spanish Prime Minister Sanchez, who has advocated for a more lenient approach to Beijing to attract Chinese investment, might leave office following a snap election called for November 29, as current polls suggest a center- and far-right coalition could form the next government. In contrast, Polish Prime Minister Donald Tusk and Italian Prime Minister Giorgia Meloni are entering the summit from a position of relative political strength.