France, Germany want new EU trade tools against China

French President Emmanuel Macron and German Chancellor Friedrich Merz have called for the EU to create a new legal system to quickly handle potential trade disputes with China, according to a letter seen by AFP. The letter, addressed to European Commission President Ursula von der Leyen, was sent days before the EU Trade Commissioner visits Beijing to address trade tensions.

Macaron and Merz wrote that the EU needs a powerful instrument to respond decisively, including the capability to cut off access to the European single market if necessary. The proposed tool could be used in a trade war, for example, if a country halted the supply of crucial raw materials. To counteract the US and China's faster and more robust retaliation, the EU's tools must be equally effective, a German government source added.

Germany and France want the commission to have the authority to act within days, without the need for approval from the EU's 27 member countries, although a weighted majority could block such action. The new instrument could be employed against any nation, but the EU's main trade concern is its deficit with China, which damages key European industries.

The trade deficit with China amounts to around €360 billion, meaning the EU imports more from China than it exports. European businesses complain of being undercut by Chinese competitors in sectors like steel for wind turbines, semiconductors, and batteries. Additionally, Europe is highly reliant on Chinese supplies of critical raw materials.

Aside from addressing trade threats, Macron and Merz also advocate for a new tool to lessen Europe's dependence on China.