Europe tries to take on China without launching a new trade war

European Union leaders, convening in Brussels today, are locked in a tense debate over how to confront China burgeoning industrial might and a record daily trade deficit now exceeding €1 billion, without igniting a full-blown trade war. The delicate balancing act underscores a deepening internal rift, with France pushing for aggressive new trade defense instruments akin to those deployed by the U.S., while Germany and Spain urge caution to protect their substantial economic ties with Beijing. The immediate trigger for the summit's urgency is China pervasive state subsidies fueling massive industrial overcapacity, particularly evident in surging electric vehicle exports and Beijing's tightening grip on critical raw materials like rare earths. This dynamic, which saw China goods trade surplus with the EU hit €360.6 billion in 2025, has European industries, from chemicals to green technology, facing an existential threat. In response, the European Commission has already launched several anti-subsidy investigations, provoking threats of retaliatory tariffs from Beijing and prompting the EU to solidify its 'de-risking, not decoupling' strategy. Today's discussions are expected to task the European Commission with both intensifying trade engagement and fortifying the bloc's trade defenses, signaling a potential shift towards more agile and systemic safeguard mechanism. Diplomats suggest leaders will likely support accelerating the use of existing tools and developing longer-term instruments to address concentrated dependencies, anticipating China inevitable countermeasures. The outcome will shape the EU economic future, dictating whether Europe can rebalance its critical relationship with China without fracturing its own internal unity or succumbing to costly economic escalation.