EU ready to make 'full use' of trade defence tools against China, Von der Leyen warns Xi

Ursula von der Leyen, Emmanuel Macron, and Xi Jinping, from right to left

It is von der Leyen’s starkest warning so far that her EU executive will leave no stone unturned in its bid to stop China’s heavily-subsidised manufacturing sector and unfair trade practices from suffocating Europe’s homegrown industries.

It is also the clearest sign to date that the bloc is preparing for a potential trade war with Beijing.

“For trade to be fair, access to each other’s markets also needs to be reciprocal,” von der Leyen told reporters in Paris after meeting the Chinese President alongside France’s Emmanuel Macron.

“We stand ready to make full use of our trade defence instruments if this is necessary,” von der Leyen added. “Europe cannot accept market-distorting practices that could lead to de-industrialisation here at home.”

“Europe will not waver from making tough decisions needed to protect its economy and its security.”

Von der Leyen took aim at China for what her executive considers to be unfair subsidies in industries such as electric vehicles (EVs) and steel, which are threatening to decimate Europe’s industry.

Beijing’s central government is wielding its economic and industrial might to support its manufacturing sectors with subsidies, cheap loans, tax breaks and preferential regulation for its domestic companies.

It has caused a glut of cheap Chinese products to flood Western markets, raising the alarm in Brussels and other EU capitals over China’s trade “dumping” practices, where goods are exported at artificially low prices.

Brussels has reacted with an increasingly assertive stance on Chinese trade, and a raft of inquiries that could soon lead to slapping punitive tariffs on Chinese imports.

Last September, Brussels launched an anti-subsidy inquiry into low-cost electric vehicles (EVs) coming from China, seen as a leap forward in the bloc’s attempts to stand up to the global powerhouse. It has since launched similar probes into Chinese producers of wind turbines and solar panels suspected of benefitting illegally from generous state subsidies.

Beijing has reacted with a highly symbolic but economically unsubstantial probe into EU imports of brandy, a move seen as targeted at France, whose president pushed for Brussels to launch the first probe into China’s exports of EVs.

In late April, the bloc made a first-of-its-kind move to punish Beijing for preventing European companies from winning public contracts in China, with a probe centered on medical devices.

“China continues to massively support its manufacturing sector and this, combined with a domestic demand that is not increasing, the world cannot absorb China’s surplus production,” von der Leyen said on Monday.

Another area of concern for the bloc is its heavy reliance on China for so-called critical raw materials, the essential components needed to produce critical technology such as solar panels and semiconductors.

Von der Leyen assured that Brussels is “de-risking” the EU’s supply chains by striking agreements with a range of partner countries that boast of natural resources in such critical raw materials.