Europe’s Response to China: Prioritizing Adaptation Over Protectionism

Key points

• The EU’s goods trade deficit with China has reached €1 billion per day, prompting calls for stricter trade controls, including tariffs and local content requirements.
• Recent pressure from France and Germany has pushed Brussels to consider powers that could restrict access to the single market for non-compliant countries.
• The impact of Chinese imports is concentrated: in 2025, nearly two-thirds of EU imports from China were in five categories, including machinery, chemicals, and cars.
• Despite declines in some sectors since 2015, EU manufacturing output, value added, and employment have edged up over the past decade, driven by growth in high-value-added industries like pharmaceuticals and specialist electronics.
• Research from the European Central Bank indicates that increased exposure to Chinese intermediate goods between 2000 and 2022 boosted annual industrial production growth in the EU by 0.6 percentage points.
• A study by the Geostrategic Europe Taskforce identified 41 critical supply chains where China depends on the EU for over 80% of imports, including medical inputs and specialist machinery.

Background

This debate follows earlier concerns about China’s export-led growth and its impact on global economies, as noted in September 2026. Germany’s specific 'China Shock' in the auto and industrial sectors has also raised political tensions, potentially influencing domestic elections. Additionally, China’s push for self-sufficiency has widened its trade surplus with Europe, intensifying pressure on EU policymakers to address industrial overcapacity.

Why it matters

The EU’s response to Chinese competition will shape its long-term industrial competitiveness and geopolitical leverage. A focus on adaptation and structural reform could help Europe maintain its strengths in high-value sectors, while protectionist measures alone may not address the underlying challenges of industrial adaptation and global supply chain dynamics.

What to watch

Brussels is expected to continue debating trade policies, including potential restrictions on single market access. Progress on implementing the Draghi report’s recommendations will be critical, as will the development of new trade deals with like-minded partners to enhance Europe’s geopolitical leverage over Beijing.