Brussels flexes its muscles amid Beijing’s backlash

Brussels is ready for a geopolitical war with Beijing to safeguard the European Union’s industrial base. The EU has been flooded by state-funded exports, which are threatening the very existence of domestic companies from the “China shock.”

Last year the trade deficit reached a staggering €359 billion, or US$423 billion. Amid a prolonged slump in consumer spending at home, Chinese manufacturers were ordered to target the world’s largest trading bloc with a tsunami of cheap, high-tech goods.

The diplomatic atmosphere has quickly deteriorated. In July, European Commission President Ursula von der Leyen warned of an “inflection point” during a 2025 summit with China’s leader Xi Jinping. Since then, open hostility has broken out.

“The current situation is not sustainable,” an EU official told Noah Barkin, a senior advisor with the Rhodium Group think tank, focusing on relations between China and Europe.

“If it doesn’t change, we will have no choice but to head into a trade conflict with China. It’s not something we want. But China is not leaving us a choice,” the EU official added, as reported by Barkin on his Substack newsletter on Monday.

If it doesn’t change, we will have no choice but to head into a trade conflict. 

EU official

Heavy metal shock:

• The EU has already moved to “protect” steel and other iron-based alloys.
• But Brussels is now planning to safeguard European chemicals and machinery sectors.

Delve deeper: “[At the same time,] China has threatened Europe with retaliation if it takes action to protect itself. As the threats have multiplied, so have the exports,” Barkin, of the New York-based Rhodium Group, wrote in his Substack post.

Big picture: Last week we reported that red security lights were flashing in Europe over “Made in China” green exports. Solar panels, wind turbines, batteries, and electric vehicles all appeared to carry a distinctive “renewable risk.”

Bottom line: In short, the continent is facing a clear and present danger, according to a report released by the Loom Strategy Centre. “Yet it is striking how poorly recognized the risks and their impact appear to be,” the think tank pointed out in a 32-page white paper.

China Factor comment: The EU is rapidly waking up to that peril with a “Made in Europe” policy. But Brussels will have to start flexing its muscles and refuse to fold under Beijing pressure. A new trade conflict is looking inevitable.