Media365
The European Union wants a new tool that could block a rival from its single market in extreme cases, as a widening trade deficit and pressure on manufacturers push Brussels towards tougher defences against Chinese imports
The European Union is considering a new trade instrument that could cut a rival such as China off from its single market, signalling a tougher approach to trade as Brussels struggles to contain a growing imbalance with Beijing.
EU leaders meeting in Brussels on Thursday, asked the European Commission to develop a proposal for the instrument by the end of 2026. The measure would be intended for extreme situations in which a trading partner is seen as attacking the bloc’s economy, Bloomberg News reported.
The proposal is expected to be negotiated next year. It could give the EU another way to respond to economic pressure from China, beyond existing tariffs and trade restrictions.
The move comes as Europe shifts from seeking greater access to Chinese markets towards protecting its own manufacturers from rising imports. The bloc’s latest efforts to limit Chinese hybrid car shipments could be the first in a wider set of trade measures.
Europe’s growing trade problem with China
A drone view of new cars lining up at an export terminal at the port in Shanghai, China. File/Reuters
The scale of the imbalance helps explain the shift. The EU imported goods worth €559.4 billion from China in 2025, while its exports to the country totalled €199.6 billion, leaving a trade deficit of €359.8 billion.
More from BusinessCompared with 2024, imports from China rose 6.4 per cent, while EU exports fell 6.5 per cent.
European manufacturers are increasingly concerned about Chinese competition across sectors, including automobiles, chemicals and machinery. Chinese companies benefit from cost advantages and strong manufacturing capacity, while European businesses face pressure on market share, profitability and jobs.
The shift is particularly significant for Germany, which has traditionally been cautious about measures that could trigger retaliation against its exporters. Berlin is now backing stronger EU trade defences alongside France.
Chinese hybrid cars face a 350,000-unit cap
The EU has already reached an understanding with China to limit imports of Chinese hybrid and plug-in hybrid vehicles to 350,000 a year. The measure is expected to begin in December and would allow the quota to increase by 6 per cent annually over four years.
Without the restriction, Chinese hybrid vehicle exports to the EU were projected to reach around 800,000 this year. The cap is expected to reduce the market share of Chinese-built vehicles in the bloc to about 6 per cent, from 12 per cent, according to Reuters.
The agreement followed a surge in Chinese vehicle shipments that intensified pressure on European carmakers. Imports of plug-in hybrids into the EU rose 86 per cent in the year to September, while prices fell 20 per cent, Reuters reported.
Brussels is also examining whether similar measures could be used in other industries. The European Commission has begun assessing trade data for signs of import surges in sectors such as chemicals and machinery, which could provide grounds for additional quotas under safeguard measures, according to Bloomberg News.
Germany has also pushed for action on chemicals, mechanical engineering and potentially pharmaceuticals, Bloomberg News reported.
From trade talks to tougher defences
China has previously restricted exports of critical materials, including rare earths, which are essential to several technology and industrial supply chains.
The EU and China agreed during their recent talks to improve the processing of Chinese export licences for rare earths and permanent magnets. The two sides also reached understandings on reducing Chinese import duties on about €4 billion worth of EU exports, including car parts, olive oil and footwear, Reuters reported.
Brussels is seeking to preserve negotiations while preparing stronger safeguards against economic pressure and excessive dependence on individual suppliers.
China has pushed back against the EU’s framing of the trade imbalance, arguing that it is being used to justify protectionist measures.
