The European Union gave China until mid-October to find a deal on trade. That date is now days away, and the mood in Brussels has shifted from whether to act to how far to go.
François Chimits, Head of the Europe Programme at Institut Montaigne, set out the picture in a briefing for the What's Up EU weekly newsletter this week. The EU's trade deficit with China is on course to top €400 billion in 2026, he writes. That reflects what he calls the second China shock: a new wave of exports, hitting Europe's strongest sectors from chemicals and machine tools to cars and green technology, that has not been matched by Chinese demand for European goods. With the United States partly closed to Chinese goods, Europe is the main outlet for the excess.
Chimits cites IMF estimates that Chinese industry benefits from subsidies worth about 4.4% of GDP a year and a currency undervalued by around 20%.
The EU did not wait for October. Tariffs have been imposed this year on about a dozen categories of Chinese goods, including chemicals, steel, tyres and agricultural products, and roughly ten more investigations are open in the same sectors. Small parcels, worth around €50 billion of EU imports in 2025 and about 90% tied to Chinese e-commerce, have been squeezed so hard that the flow has nearly halved. In steel, China's quota was cut by two-thirds and the out-of-quota tariff doubled.
The Foreign Subsidies Regulation has been used too, to block the acquisition of a German electronics retailer and to keep China's leading rolling-stock maker out of public tenders. Digital rules have brought roughly €2 billion in fines against Chinese e-commerce players since early 2025.
In late June, the EU and China launched a negotiating framework with working groups on trade and investment, export controls, intellectual property and WTO reform, and set mid-October as the deadline. Voluntary export restraints have been discussed, according to European officials. EU leaders have put China on the agenda of their 15-16 October summit, and the Commission is expected to get final clearance for some new barriers, with the scope depending on what the talks produce.
"Dialogue alone will not be enough," the EU's chief trade-defence official, Denis Redonnet, has said. Chimits expects new measures by the end of October on chemicals, hybrid vehicles and machine tools, with the size of the response depending on Beijing's concessions and on how hard China retaliates. China has threatened countermeasures after each European step.
The biggest change is in Berlin. Germany, under pressure from large parts of its own industry, signalled support for strong measures in late August, and a broader package is due for approval by the chancellery before the summit. The Netherlands, Belgium and Sweden, once reluctant, are also pushing for action. The remaining resistance comes mainly from Slovakia and Spain, both keen to protect their ties with Beijing. Spain's government is now heading into an election, which will not help it take a firm line.
Europe also cannot count on Washington to share the burden. At last week's G20 trade ministers' meeting in Milwaukee, there was no consensus on tackling structural excess industrial capacity, with a handful of members objecting, and the United States was the only signatory of the closing chair's statement. Many of the countries most worried about Chinese exports are on a list of 16 partners that Washington is investigating for possible new tariffs.
The EU is moving from case-by-case trade defence to a broader policy of managing Chinese imports. For exporters, that means more tariffs, more quotas and a bigger role for the foreign-subsidies tool. For consumers, it can mean higher prices on some goods. For Beijing, the calculation is that it cannot afford to lose its biggest export market for higher-end products, which gives Europe more leverage than the rhetoric suggests.
What to watch: the text of the 15-16 October summit conclusions, whether Beijing offers export restraints before then, and which Chinese countermeasures follow the first new tariffs.
