European Commission President Ursula von der Leyen announced on Friday that the EU executive will develop new trade defence tools, including a diversification instrument, to address what she called an "unsustainable" trade deficit with China. Speaking at a press conference closing this week's European Council summit in Brussels, von der Leyen said the bloc must use its existing toolbox more proactively and strategically to defend European interests.
"Europe has already built an extensive toolbox in recent years. Now we must use it more proactively and more strategically to defend our European interests," she told reporters. The announcement comes as EU leaders grapple with a daily trade deficit of roughly €1 billion with Beijing, a figure European Council President António Costa described as unsustainable.
De-risking, Not Decoupling
Both von der Leyen and Costa stressed that the EU's strategy remains de-risking rather than decoupling from China, while keeping dialogue open. "Our strategy is clear: de-risking, not decoupling, while we engage in dialogue," Costa said. "But we need to address the challenges we are facing. €1 billion in trade deficit per day is simply unsustainable. We cannot continue to raise these issues without any concrete results."
The diversification instrument is designed to be country-agnostic, focusing on helping European companies in specific sectors accelerate supply chain diversification, which von der Leyen noted has been too slow. According to early media reports, the tool could require companies to source critical components from more than one or two countries to avoid chokepoints that could be weaponised.
The Commission has not set a timeline for presenting the new instruments, but several EU officials indicated that von der Leyen's State of the Union speech in September would be the most likely occasion. Whether the unity displayed at the summit will hold when concrete measures are proposed remains uncertain.
Divergent National Interests
Not all member states favour a more aggressive trade policy toward Beijing, which has already threatened retaliation. Germany, heavily dependent on exports to China, and Spain, which has positioned itself as a hub for Chinese investment, are generally wary of provoking Beijing. Diplomatic sources emphasised the importance of keeping dialogue open, especially given the erratic trade policies of the US government under President Donald Trump.
France, by contrast, has led calls for stronger tools to contain China's overcapacity and market-distorting subsidies. President Emmanuel Macron said the summit showed Brussels is taking a harder line. "We want to modernise these [trade] tools, and the Commission now has the mandate to respond more quickly – to say that as soon as there is a suspicion of unfair competition, or when we see positions that pose problems, we must be able to react and protect," Macron told reporters on Friday.
Other EU leaders stressed the need to strengthen Europe's own economic competitiveness, particularly by reforming the internal market, and to be ready for the retaliation that would follow if Brussels imposes serious countermeasures. Von der Leyen acknowledged the pressure: "The pressure is high. And if the pressure is high, the instrument will be used, because there is a need for it. The figures speak for themselves, and we have to rebalance them."
The announcement comes amid broader discussions on EU trade policy, including calls to curb trade with Israeli settlements and ongoing debates over the bloc's €2 trillion budget. The EU's trade deficit with China has become a central issue, with leaders seeking a unified response that balances economic interests with strategic autonomy.
