European Union leaders debated new steps to curb the bloc's growing trade deficit with China and reduce reliance on critical supplies, reported Reuters.

Diplomats indicated that there is a convergence among the 27 EU members regarding the unsustainability of the goods trade deficit with China, which currently stands at about EUR1 billion (US$1.15 billion) per day. This issue has become increasingly pressing as transatlantic tariffs limit access to the US market.

China's goods trade surplus with the EU reached EUR360.6 billion in 2025, marking a 15 percent increase from 2024, and expanded another 10 percent in the first four months of 2026. Additionally, Beijing has restricted rare earth exports since April 2025, adversely affecting EU firms.

Luxembourg Prime Minister Luc Frieden called for dialogue but insisted that trade must be fair. France has advocated for a tougher stance, while Germany and Spain have taken a more cautious approach. Spain distanced itself from a joint paper proposed by France, Italy, the Netherlands, and Lithuania, which suggested duties or quotas to limit reliance on single countries.

Spanish Prime Minister Pedro Sanchez emphasized that Europe needs balanced relationships and should strive to build bridges with both China and the US.

The EU's trade defenses already target China. Of the 21 new anti-dumping and anti-subsidy probes, 18 involve Chinese producers. Duties on Chinese electric vehicles imposed since 2024 have prompted retaliatory measures on EU dairy and brandy.

Critics argue that investigations are too slow and narrow, allowing Chinese producers to adapt. The Commission noted that while EV imports fell, hybrid shipments rose, with EV volumes rebounding in early 2026.

The EU executive plans to review trade defenses in the third quarter and will consider new measures to address overcapacity and reliance on single suppliers. Sensitive sectors may be required to source from at least three different suppliers.