EU Says It Will Use All Tools to Rebalance Trade With China

The European Union has said it will deploy all available tools to rebalance its trade relationship with China, as the October deadline to resolve trade disputes looms.

In her State of the Union address on Wednesday, European Commission President Ursula von der Leyen said the bloc’s trade deficit with China has grown to 1 billion euros ($1.2 billion) a day.

“It has reached a tipping point,” von der Leyen said in Strasbourg, France.

“Some say the second China shock is looming. But it’s already here. It shows in our communities and factories across our Union. It leads to de-industrialization in the industrial heartlands of Europe,” she said. “This is unsustainable.”

The European Commission, the bloc’s executive arm that oversees trade matters, is under pressure from member states to deliver tangible results in its engagements with Beijing. Following a meeting with Chinese Commerce Minister Wang Wentao in late June, EU trade chief Maros Sefcovic set an October deadline for China to curb its massive exports as talks continue.

“But this dialogue must now lead to results,” von der Leyen said.

“China’s weaker domestic demand means it also needs our European market. So it is in both our interests to work together and find solutions.

“But let me be very clear: We will use all tools at our disposal to rebalance our relationship. Words are good. But deeds are better.”

The latest Chinese customs data show that in August, shipments to the EU grew by only 6.6 percent from the same period last year, a sharp slowdown from 16 percent growth in July. But China’s exports to the bloc still topped imports by $32 billion—the fifth month in a row that the trade surplus exceeded $30 billion.

Exports have emerged as a key pillar of China’s ailing economy, especially amid the long-running property crisis that has left millions of Chinese tightening their purse strings.

Concerns are growing across Europe that an influx of subsidized, cheap exports from China threatens the bloc’s homegrown businesses. Earlier this month, German car giant Volkswagen announced a sweeping restructuring plan, including 50,000 additional job cuts, amid fierce competition from China.

Beyond the surge in exports, tensions also persist over Beijing’s export controls on critical minerals and rare earths, which have disrupted global supply chains and caused production delays for European companies.

Speaking to lawmakers on Wednesday, von der Leyen highlighted the bloc’s “dangerous” reliance on China for more than 80 percent of critical raw materials and 90 percent of rare earths.

“We need to urgently procure and build up our reserves,” she said, adding that the EU “will establish a new European corporation on critical raw materials” essential for electric vehicles, semiconductors, batteries, and defense.