EU leaders opened a two-day summit in Brussels on Thursday with economic competitiveness at the top of the agenda, as they seek ways to respond to rising Chinese imports and high energy prices.
Last week, the bloc’s executive branch reached an agreement with Beijing to moderate Chinese exports of hybrid and plug-in hybrid vehicles to the European Union after months of negotiations.
European Trade Commissioner Maros Sefcovic said on Oct. 9 that China has agreed to facilitate EU companies’ applications for export licenses for rare earths and permanent magnets and to improve market access for European products.
The agreement is expected to feature prominently in broader discussions about trade with China, as European manufacturers continue to face mounting competitive pressure.
Last month, German car giant Volkswagen announced a sweeping restructuring plan, including plant closures and 50,000 additional job cuts, amid fierce competition from China. Less than two weeks later, German Chancellor Friedrich Merz called for stronger European trade defenses and said Europe needs effective tools to reduce its dependence on Beijing.
The EU’s trade deficit in goods with China reached 103 billion euros ($115.4 billion) in the second quarter of 2026, up from 66 billion euros ($73.9 billion) in the first quarter of 2024, according to Eurostat.
Energy Costs
EU leaders are also expected to ask the European Commission to suggest short-term ways to help households and businesses deal with rising energy costs.
Earlier this year, the EU agreed on new safeguards designed to prevent sharp increases in fuel and heating costs when its new Emissions Trading System (ETS) for buildings and road transport begins operating in 2028.
The June 11 agreement allows regulators to release additional emissions permits if carbon prices rise too quickly, aiming to limit price swings while maintaining the bloc’s climate objectives.
The scheme is separate from the EU’s existing ETS, which mainly covers power plants, heavy industry, aviation, and shipping. Several EU governments say the current ETS also needs reform because they argue it contributes to high energy costs.
Czech Prime Minister Andrej Babis said on Feb. 2 that the EU should overhaul its carbon trading systems and cap permit prices to lower energy costs and improve industrial competitiveness.
Slovakia also supported efforts to delay or modify the scheme, while France called for stronger safeguards against sharp price increases. Italian Industry Minister Adolfo Urso said in March that suspending the ETS could serve as an “emergency response” if reforms cannot be agreed upon quickly.
EU Budget, Ukraine, Middle East
Alongside competitiveness and energy prices, EU leaders are expected to discuss the bloc’s next long-term budget, which will cover the period from 2028 to 2034.
Known as the Multiannual Financial Framework (MFF), the budget determines funding for major programs ranging from agriculture to defense. The European Commission has proposed a budget of about 2 trillion euros ($2.2 trillion) for 2028–2034, but the plan has exposed deep divisions among member states.
Several net contributor countries. including Germany, the Netherlands, and Nordic countries, argue that the proposal is too large. Other members want to protect funding for farmers and poorer regions even as the EU seeks to boost spending on defense, competitiveness, and support for Ukraine.
The European Council said leaders hope to reach an agreement on the main parts of the budget by the end of 2026.
Support for Ukraine will also remain high on the agenda. EU leaders will discuss continued assistance to Kyiv, including its critical infrastructure, ahead of winter. They will also review the country’s progress toward EU membership.
Discussions on the Middle East will include freedom of navigation and maritime security. Leaders will also consider progress toward Montenegro’s accession and broader reforms needed to prepare the EU for future enlargement.
Reuters contributed to this report.
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