Europe is edging closer to a trade war with China. Here’s why.

[BRUSSELS] Kaja Kallas, the top European Union diplomat, recently suggested that ending the continent’s dependence on China was like trying to cure a disease.

“Chemotherapy” might be needed, she said, and it was likely to be painful.

The comments were an example of the tone Europe is increasingly taking on China, the second-largest goods trading partner for the 27-nation EU, after the US.

As Beijing adopts more aggressive trade policies and as imports from China into Europe soar, European leaders and companies are fretting over their reliance on Chinese products – and debating how to pull back.

With China only growing more dominant in manufacturing, Europe faces an existential threat to its own industries.

“The tone is basically panic,” said Jeromin Zettelmeyer, director of Bruegel, an economic think tank in Brussels. “There’s a sense of imminent collapse of industry, of imminent danger.”

Anxiety in Brussels is being met with hostility in Beijing, where officials warn that China will hit back at any protective measures. The sparring is likely to heat up further in the coming weeks.

World leaders will talk about global economic imbalances at a Group of Seven meeting in Evian, France, in June. China is then expected to be on the agenda at a meeting of the EU’s 27 top leaders shortly after.

On Friday (May 29), the EU’s executive arm is expected to have an early debate on policies towards China that could help to set the tone for the coming discussions.

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European officials still express hope that they might be able to work cooperatively with China to alter trade imbalances, which have become more pronounced as Beijing has dialled up exports to juice economic growth.

But, they are also mulling more powerful trade and industrial measures to curb China’s growing dominance in sensitive fields.

EU’s reliance on China

Cutting back on China could prove profoundly tricky for Europe. Politicians and businesses fear retaliation, and consumers are hooked on what China is selling.

Europeans continue to snap up cheaper Chinese goods, especially electric vehicles, which the EU has already tried, unsuccessfully, to stop from flooding their market.

“We’re not in a good place,” said Rebecca Arcesati, who is based in Brussels for the Mercator Institute for China Studies, a think tank.

She noted that European leaders need to contend with voters and with more short-term political considerations – and that makes it hard to counter the flow from China, especially if Beijing retaliates.

“Our systems were not designed to contend with such a challenge,” Arcesati said.

China has government subsidies and programmes that have strengthened the position of the country’s factories and companies. The government in Beijing has leaned on industry after a property crisis left policymakers needing another engine for growth.

And as American tariffs made exporting to the US more complicated for Chinese producers, those factories increased their exports to markets such as Europe.

In the first quarter of this year, imports from China into Europe jumped sharply.

An analysis of 2026 customs data, by the online newsletter Soapbox and the Mercator Institute for China Studies, found that China’s trade imbalance with the EU reached record levels early this year as electric vehicles flooded in.

The jump came as Chinese carmakers faced slumping demand at home and pushed into Europe. At the same time, European consumers turned to greener alternatives as the war in the Middle East pushed up fuel prices.

That followed a trade deficit in goods in 2025 of about US$418 billion, based on EU figures.

The combination is threatening European manufacturers and their employees, especially in places such as Germany, which has traditionally been a big car and chemical manufacturer and is now struggling to compete.

As worries mount, Europe has turned to harsher rhetoric and bolder ideas.

French President Emmanuel Macron, long a China critic, has called on the EU to create measures that protect strategic industries, similar to ones that the US has and uses.

Spanish Prime Minister Pedro Sanchez, who is often seen as one of the more Beijing-friendly leaders in Europe, said during a recent trip to Beijing that the continent needed China “to open up so that Europe does not have to close itself off”.

Spain joined France, Italy, Lithuania and the Netherlands recently in preparing a paper urging the EU to respond aggressively, including with new trade tools.

While the paper did not single out China by name, it criticised trading partners with “systemic and structural industrial overcapacity”.

Brad Setser, an economist at the Council on Foreign Relations, a think tank, said that many European leaders have to tread lightly with China out of fear of retaliation.

But, he added, their fear of manufacturing losses may come to outweigh that, including in places such as Germany.

Europe is already taking some steps to protect itself, including with the EU’s proposed Industrial Accelerator Act, a wide-ranging policy meant to rebuild the bloc’s manufacturing base.

The plan’s design would effectively bar Chinese companies from benefiting from some key subsidies, helping European-made electric vehicles, in particular.

That policy has been met with outrage from Beijing, which has denounced the plan as protectionist and warned of retaliation.

But China’s own increasingly aggressive stance on trade has helped the European backlash to intensify.

In 2025, China twice prohibited exports of rare-earth minerals and magnets in retaliation to US tariffs. The bans hit Europe, which uses both materials in high-tech and green-energy production.

The breakdown in supply laid bare to European companies just how dependent they were.

In April, Beijing unveiled rules that gave officials power to examine corporate records, interrogate employees and even prevent executives from leaving China if they were determined to be helping to move supply chains out of the country.

Based on a recent assessment by the European Chamber of Commerce in China, that move “could now inflict an unprecedented level of damage on Europe’s economy”.

China’s pushback has come partly because Beijing senses a less unified front against its trade policies as Washington and Brussels spar, said Noah Barkin, an expert on European-Chinese relations for the Rhodium Group, a research firm.

He added: “(Beijing’s) message to Europe is: ‘Your “Best Friend Forever” is gone and even the Americans are seeking stability with us, so don’t test us.’” NYTIMES