BRUSSELS — European Trade Commissioner Maroš Šefčovič opened two days of talks in Beijing on Thursday aimed at rebalancing a gaping trade deficit, with failure to reach a deal likely to test Brussels’ resolve to impose tougher trade restrictions.

The meeting marks the final round of an effort launched in June to reset the lopsided trading relationship, and will hinge on whether China’s Commerce Minister Wang Wentao is prepared to make substantial concessions.

If no agreement can be reached to narrow the EU’s €1 billion-a-day goods trade deficit, Brussels and Beijing could find themselves on a collision course. EU leaders will review the outcome of the talks at a summit in Brussels next Thursday, where they will consider next steps.

Arriving in China, Šefčovič said his goal was to balance what he called an unsustainable trade deficit. Heading into a meeting with Wang, he said it was crucial that the talks deliver “tangible outcomes.”

The discussions have zeroed in on cars, with Chinese exports increasingly eating into the market share of European automakers. In August, one in eight cars bought in the bloc was Chinese, thanks largely to a boom in sales of plug-in hybrid electric vehicles.

European negotiators have been pushing China to commit to some form of export restraint — in particular for hybrids. Unlike Chinese-made battery-electric vehicles, which were hit with extra countervailing duties in 2024, plug-in hybrids are not subject to such measures.

Without meaningful commitments from Beijing, the Commission has warned it will resort to unilateral trade restrictions. For cars, it is considering safeguard measures that would mix import quotas and tariffs to protect European automakers.

Chemicals are next. Industry Commissioner Stéphane Séjourné said Thursday that the Commission plans to introduce targeted safeguards on plastics and composite materials, subject to a request from EU governments that Brussels do so.

Wind in his sails 

Šefčovič flew to Beijing with the backing of the leaders of Europe’s two biggest economies — France and Germany — to take a tougher approach to trade.

In a joint appeal on Monday, President Emmanuel Macron and Chancellor Friedrich Merz said the Commission should be given a freer hand to shut off access to the EU for goods from countries that distort the bloc’s single market.

While the two leaders did not mention China in their letter to Commission President Ursula von der Leyen, there was no mistaking the target of their proposed trade “kill switch,” which could be blocked only by a qualified majority of EU countries.

The EU already has a powerful trade weapon in its Anti-Coercion Instrument, designed to counter economic bullying by foreign powers. 

But Brussels has yet to muster broad support from member countries to deploy it, most recently in January when U.S. President Donald Trump threatened to seize Greenland, a Danish territory.

The EU’s difficulty in responding swiftly to trade threats has heightened concerns about a surge in Chinese exports that European officials say benefit from unfair government subsidies. With Trump hiking U.S. tariffs, ever more Chinese exports are heading to Europe — increasing pressure on industries that are already being forced to retrench.

Europe’s heavy dependence on China for processed rare earths and other critical raw materials also leaves it vulnerable to retaliation should relations deteriorate.

“If we aren’t willing to fix the way our model works, then we’ll be destroyed,” said one EU diplomat, summing up the concerns flooding Brussels.

“What’s the point of having [more tools] if the Chinese can shut down our strategic production in a matter of days?”

Low expectations

Although Šefčovič entered the talks strengthened by the Franco-German letter, a second diplomat said they didn’t foresee a deal with Beijing this week.

“He knows that a lot of member states are behind the Franco-German push,” the diplomat said, adding that this “has been seen in China.” 

But Beijing has little room to compromise, given its reliance on exports to sustain growth amid weak domestic demand and a prolonged property slump.

“The Chinese side is starting to recognize that there is a problem. But I don’t think they are ready to enter into a substantial deal,” said Gunnar Wiegand, a former head of the EU diplomatic service’s Asia-Pacific department.

Wiegand, now a visiting fellow at the German Marshall Fund, said Šefčovič had earned a reputation as a dealmaker in talks on Britain’s exit from the EU and in last year’s trade deal with Trump. This time, however, “both sides are bound by their own circumstances,” he said.

Europe is desperate to halt the erosion of its industrial base, while China remains heavily dependent on exports to sustain economic growth. 

“The Chinese are going to object to being singled out. Even if a deal with the EU would be the most rational solution, other important markets for Chinese exports, such as ASEAN countries, will start asking the same. It will undercut their global market,” he said. 

BERLIN — The European Commission needs the power to act much faster against trade threats, German Chancellor Friedrich Merz and French President Emmanuel Macron urged in a joint letter on Monday.

The leaders of the EU’s two most powerful and populous countries want Brussels to be able to act more quickly and decisively in a trade confrontation — while making it harder for EU capitals to block action.

The proposal seeks to strengthen the hand of Trade Commissioner Maroš Šefčovič, who flies to Beijing on Thursday for the final round of talks in a four-month process where Brussels is seeking to rebalance the EU’s trading relationship with China.

Merz and Macron said the Commission should be empowered to restrict, or even completely cut off, imports from countries seen as creating “severe and systematic distortions” in the single market. In their letter and a joint position paper, they call for urgent action, saying the EU’s existing trade defense toolbox “does not suffice anymore.”

“Without delaying the full use of the existing set of instruments, we need a comprehensive framework to complement our toolbox with new legal instruments — in a lean and non-bureaucratic way,” they wrote.

One senior German official, who was granted anonymity to speak candidly, described the tool as a “second-strike weapon” that could be deployed in the event of an escalating trade war.

“We can see that certain players have important, powerful instruments at their disposal,” the official said, pointing to the sweeping so-called Section 301 tariffs imposed by U.S. President Donald Trump and China’s dominance of critical-mineral supply chains. The EU, they explained, needed its own countermeasures. 

“When trade rules are not respected, we need to be credible regarding the fact that access to the internal market cannot be guaranteed,” said an official from Macron’s office, noting that “dialogue does not preclude our determination to protect our most vulnerable sectors.” 

The French official said the procedure for activating the new measures should be based on the one that already exists for anti-dumping cases. This allows the Commission to take action without first seeking a green light from EU capitals. 

“We can’t keep waiting — for months or sometimes even years,” the French official said. 

A new bazooka

While the joint letter doesn’t mention China by name, it clearly relates to the bloc’s €1-billion-a-day trade deficit with the world’s leading exporter and growing concerns about the impact of Chinese overcapacity on European industry.

The existing Anti-Coercion Instrument, also known as the EU’s trade “bazooka,” in theory gives the Commission enormous powers to restrict imports in response to actions that are considered economic coercion.

In practice, however, activating the ACI requires months of investigation and the support of a qualified majority of EU governments. Divisions among capitals have previously complicated efforts to agree on trade measures targeting China.

The new instrument proposed by Berlin and Paris — which could either update or replace the ACI — would make it much harder for EU member countries to block swift action. Commission measures would stand unless a “reverse” qualified majority of countries voted to block them. 

Bernd Lange, who heads the European Parliament’s trade committee, welcomed the Franco-German letter as a step forward. The German Social Democrat negotiated on behalf of the Parliament during the development of the ACI, pushing unsuccessfully to give the Commission more leeway to activate the instrument. 

“It was so complicated,” Lange said. “If there is now a shift in the mindset of the Council, it’s really good.” 

Watershed moment

Sander Tordoir, chief economist at the Centre for European Reform, called the letter and position paper a “watershed” moment. 

“What the two leading European capitals are signaling is that they want to flip the switch and have a more structured, comprehensive set of policies to slow down the impact of the second China shock on European industry,” said Tordoir, who has advocated that Europe adopt U.S.-style 301 tariffs in the past.  

Germany’s shift toward a more aggressive trade posture is particularly significant given Berlin’s previous reluctance to back stronger EU trade defenses.

“One of the major actors watering down the ACI back in the day was in fact Germany,” Tordoir said. “Germany has transitioned from hesitator-in-chief on stronger European trade tools to actively backing a number of concrete proposals.” 

The document is part of broader Franco-German negotiations on the EU’s top economic files. The talks were launched by Macron and Merz after a joint ministerial meeting in Cologne in July, when the two leaders said they were converging on a more aggressive stance toward China. 

The Franco-German letter also calls on the Commission to take new steps to diversify European supply chains and lessen dependency on Chinese imports. The Berlaymont has already announced that it is developing a diversification instrument aimed at encouraging manufacturers to wean themselves off cheap Chinese imports. It plans to publish the proposal by the end of the year.

EU leaders will discuss the outcome of Šefčovič’s trade mission to China at a summit in Brussels on Oct. 15-16. 

Hans von der Burchard reported from Berlin, Giorgio Leali from Paris and Carlo Martuscelli, Jordyn Dahl and Camille Gijs from Brussels. This article has been updated.