EU leaders prepare China policy showdown as trade war fears mount

A fortnight that could reshape Europe's economic relationship with China began in earnest on Tuesday, as Beijing's commerce vice-minister Ling Ji touched down in Brussels for talks with the European Commission's new trade director, Ditte Juul Jorgensen. The visit coincides with the start of diplomatic preparations for next week's European Council summit, where the 27 national leaders will attempt to agree a common position on China after years of drift and division.

A summit that has been building for months

The leaders' meeting has been on the calendar since the spring, but the atmosphere has sharpened considerably since the Commission unveiled its latest trade defence instruments earlier this year. The foreign subsidies regulation, the anti-coercion instrument and a revised methodology for calculating dumping margins have all entered into force since 2023. Each was designed to give the EU legal tools to address what Brussels calls distortions caused by state-backed Chinese overcapacity in sectors from steel to solar panels and electric vehicles.

Until now, the Commission has moved cautiously, opening investigations rather than imposing definitive duties. That caution reflects a long-standing institutional preference for dialogue over confrontation. But the mood among member states has shifted. France, Italy and Poland have publicly urged faster action on electric vehicle subsidies. Germany, traditionally the most reluctant to antagonise Beijing, has softened its resistance after domestic manufacturers warned that the flood of competitively priced Chinese EVs threatens their home market.

Beijing's message: retaliation is ready

Ling Ji's schedule tells its own story. After Brussels, he travels to Berlin and Dusseldorf for forums with German business leaders. The choice of Germany is deliberate. For two decades, Berlin has been Beijing's most reliable advocate inside the EU, arguing that economic interdependence creates stability. Chinese officials have made clear in private briefings that they view the current trajectory as a betrayal of that understanding. Publicly, the Ministry of Commerce has pledged to "take all necessary measures" to defend Chinese firms' legitimate rights and interests.

The threat is not abstract. In the past eighteen months, China has launched anti-dumping investigations into EU brandy, pork and dairy products, and restricted exports of gallium and germanium, critical minerals for semiconductors and defence applications. Each move has been calibrated to inflict pain on politically sensitive sectors in key member states. The brandy probe targets France; the pork investigation hits Spain and Denmark; the mineral controls affect Germany's high-tech supply chains.

The Commission's engagement strategy under strain

For the Commission, the preferred path remains what officials describe as "managed engagement". Jorgensen, who took over the trade directorate-general in January after serving as director-general for energy, has argued that the EU's new instruments are defensive, not protectionist. In a speech to the European Parliament's trade committee in March, she said the goal was "a level playing field, not decoupling". The Commission has also restarted the high-level economic and trade dialogue, dormant since 2021, with a session in Beijing in April.

But the Chinese side has given little ground. EU negotiators report that their counterparts refuse to discuss the structural drivers of overcapacity, state-directed credit, local government financing vehicles, and implicit guarantees for state-owned enterprises. Instead, Chinese officials characterise EU measures as politically motivated containment, echoing the language used against US policies. The frustration in Brussels is palpable. One senior diplomat, speaking on condition of anonymity, said: "We explain until we are blue in the face that this is about our own resilience. They simply do not accept the premise."

Member states fracture over the pace of action

The summit will expose divisions that the Commission has papered over. The eastern member states, led by Poland and the Baltic trio, want the toughest possible stance, arguing that Chinese economic leverage is a geopolitical threat. They point to Beijing's refusal to condemn Russia's invasion of Ukraine and its tacit support for Moscow's defence industry. At the other end, Hungary and Greece have warned against a trade war that would hurt their ports and logistics sectors, which have benefited from Chinese investment.

Germany occupies the uneasy middle. Chancellor Olaf Scholz's government has backed the Commission's investigations but resisted calls for pre-emptive tariffs. The German automotive lobby, however, has broken ranks. In a position paper leaked to the Financial Times in May, the VDA association warned that Chinese brands could capture 25% of the EU EV market by 2027 without stronger defences. That figure has concentrated minds in the chancellery.

The electric vehicle investigation as flashpoint

The Commission's anti-subsidy probe into Chinese battery electric vehicles, launched in October 2023, is the most consequential test. Provisional duties were due in June, with a final decision expected by November. The investigation covers not only Chinese brands such as BYD, Geely and SAIC, but also Western manufacturers producing in China for export to Europe, Tesla's Shanghai plant and BMW's joint venture with Great Wall. That complexity has made the case politically explosive.

Beijing has signalled that definitive duties would trigger immediate retaliation, likely targeting European aviation, agriculture and luxury goods. Airbus, which delivers roughly a fifth of its commercial aircraft to Chinese airlines, is seen as especially vulnerable. So too are French cognac houses and German premium carmakers, both of which derive a significant share of global revenue from the Chinese market.

A wider strategic debate behind the trade fight

The summit will not produce a single decision. Instead, leaders are expected to endorse a "strategic compass" for China policy that balances three objectives: de-risking critical supply chains, enforcing fair trade rules, and maintaining channels for cooperation on climate change and global health. The phrase "de-risking" was adopted at the G7 summit in Hiroshima in 2023 at Europe's insistence, precisely to distinguish the EU's approach from the US rhetoric of decoupling. But in Beijing, the distinction is dismissed as semantic.

What has changed is the EU's willingness to act unilaterally. The Carbon Border Adjustment Mechanism, which enters its definitive phase in 2026, will impose a carbon price on imports of steel, aluminium, cement and electricity, sectors where Chinese producers dominate global output. The Foreign Subsidies Regulation has already been used to unwind a Chinese acquisition of a European medical device company and to probe a Chinese wind turbine supplier in Spain, Bulgaria and Romania. These are not theoretical tools.

The calendar ahead

Next week's summit is only the opening act. The Commission must decide on provisional EV duties by early July. The anti-coercion instrument's first test case, likely involving Chinese pressure on Lithuania over Taiwan, could be triggered before the summer recess. The European Parliament's trade committee will hold hearings on the China strategy in September. And the EU-China summit, postponed since 2022, may finally be rescheduled for the autumn, though neither side has confirmed a date.