Pressured at home, EU leaders weigh China trade steps

Highlights:

• China trade tops agenda of two-day meeting
• EU leaders go to Brussels with rising troubles at home
• Ukraine, Middle East and EU budget also on agenda

European leaders gather in Brussels on Thursday to weigh up the future of trading ties with China, whose surging exports of cars and other manufactured goods are threatening to harm local industry and cause mass layoffs across Europe.

Other topics for the two-day meeting range from Ukraine – including US President Donald Trump's diesel deal with Russia – to the Middle East, defence, migration, the EU's long-term budget and moves to enlarge the 27-country bloc.

For some, the summit may mark a welcome break from domestic troubles. French President Emmanuel Macron is facing student protests and sharp bond losses over a budget deadlock, German Chancellor Friedrich Merz is struggling to get his coalition on track after regional vote defeats, and Spanish Prime Minister Pedro Sanchez trails in polls before an election.

Across Europe, mainstream politicians are under pressure from far-right and nationalist parties buoyed by a sense among many voters that the economy is not generating enough wealth to fund the levels of public services they expect.

Twin challenges of cheap Chinese exports and higher US tariffs are putting further pressure on the region's industrial base and leading in some cases to job losses – such as the 100,000 jobs set to go at Germany's Volkswagen.

Growing trade deficit with China

Against that backdrop, EU leaders will start on Thursday by discussing whether a preliminary deal sketched out with Beijing to stem a surge of hybrid car imports is a good enough first step to keep talking to China about a wider trade understanding, rather than envisaging tougher restrictions.

Franco-German proposals have already been presented for possible measures to rein in a goods deficit with China that hit €360 billion ($402 billion) last year and was already €200 billion in the first six months of 2026.

European Commission President Ursula von der Leyen said such a deficit was "unsustainable" and promised the EU would use every possible means to reduce it.

The EU executive's focus has shifted away from improving access for European companies to Chinese markets and towards allowing China to sell less into the bloc. Trade deficits exist in many sectors, including machinery, textiles, basic metals, chemicals and cars.

European Trade Commissioner Maros Sefcovic called the EU-China deal last week a "very good result" but cautioned that it was only a first step in the wider process of rebalancing.

EU leaders are likely to tell the Commission to keep up its dialogue with Beijing, while determining whether to take further measures. But a senior Commission official said on Monday that dialogue alone was unlikely to complete the job.

Last week's Franco-German paper said there was an urgent need for measures to deal with imports of chemicals and PET – the plastic widely used in packaging. It also called for measures to limit companies' reliance on single sources for critical supplies and to strike back quickly against countries that harm the bloc.

The Commission is likely to propose the first such measure in December, even if leaders this week decide to keep talking to China in the meantime.

German U-turn

The joint paper marks a U-turn for Germany, which only two years ago was a vocal critic of EU plans to impose tariffs on China-built electric vehicles. Now, it has signed up to France's protectionist stance.

"It is significant that a policy switch that had been boiling under the surface in Berlin for the last few weeks and months, is now official," said Sander Tordoir, chief economist at the Centre for European Reform. "And it is significant that the two most important EU member states clearly see eye to eye on how to deal with the second China shock."

Macron lost his parliamentary majority in 2024, so European policy is one of the few remaining levers through which he can still exert political influence and try to shape his legacy – he has to step aside next year when his presidential term ends.

Sanchez, who has pressed for a softer line towards Beijing as his country welcomes Chinese investment, could meanwhile be out of office after a snap election he called for 29 November, as polls show the centre-right and far-right could win enough votes to form a government.

By contrast, Polish Prime Minister Donald Tusk and Italian Prime Minister Giorgia Meloni enter the summit from positions of relative political strength, although rising inflation and energy costs are hampering Italy.

The government's agenda in Poland has been stymied by the nationalist president, while weariness towards refugees and fears of war in Ukraine spilling across the border have pushed voters towards far-right parties.