Brussels summit set to sidestep China trade confrontation

The European Commission has been pushing for an 'overcapacity instrument' to counter Beijing’s practice of flooding markets with cheap goods, a strategy officials warn could bankrupt European rivals. While the bloc’s trade deficit with China remains a profound economic threat, internal divisions have stalled a unified response. A paper signed in late May by France, Italy, the Netherlands, and Lithuania called for a tougher stance on structural overcapacity, yet Germany—whose trade deficit with China is projected to exceed €100 billion this year—remained notably absent from the signatories.

Beijing’s influence is further complicated by strategic investments across the continent. Spain, initially a proponent of the tougher stance, withdrew its support after receiving significant Chinese capital for energy and digital infrastructure. EU officials are also tracking Chinese-funded manufacturing hubs in nations like Morocco, where over $6 billion in investment has fueled an electric vehicle industry that now threatens European market share. EU trade commissioner Maroš Šefčovič has flagged this as a critical vulnerability, urging firms to diversify suppliers to mitigate reliance on Chinese output.

Political winds are shifting in Berlin, though not fast enough to alter next week’s agenda. Manfred Weber, leader of the EPP group in the European Parliament, recently warned that the bloc must fight back or risk seeing its industrial base crippled. Despite such rhetoric, the current draft of the summit conclusions remains vague, opting for broad language on 'global macroeconomic imbalances' rather than addressing the elephant in the room. By failing to act, the EU leaves its industrial policy in a state of paralysis, effectively kicking the decision down the road.