The still-being-drafted “diversification instrument” is intended to require companies in critical sectors to expand their supplier base, reducing excessive reliance on China rather than necessarily requiring full reshoring. Its design, covered sectors, thresholds and enforcement mechanisms have not yet been publicly specified. Insufficient evidence is available on those details.

The proposed Industrial Accelerator Act complements this approach on the demand side: it mobilises public procurement and public incentives to support low-carbon, European-made products and net-zero technologies. 13

In practical terms, the Act would give European production a preference where public money is involved, supporting strategic manufacturing capacity and decarbonisation rather than operating as a blanket ban on Chinese imports. 135

The EU sees an untenable mix of strategic supply dependence and a growing Chinese goods surplus. In Germany, the China trade deficit had widened to €89.3 billion by late August, while German exports to China fell more than 12% year on year in the first half of 2026, to just under €37 billion. 67

China is no longer merely a low-cost supplier or export market: it is competing with German firms in cars, industrial machinery and increasingly sophisticated manufactured products, including medical technologies. That undermines the export-led business model of German manufacturers.

The automotive evidence is especially stark: despite EU countervailing duties on Chinese battery-electric vehicles from October 2024, the EU’s passenger-car trade balance with China turned negative in the first half of 2025, by €1.2 billion. 2

Job reductions are a political accelerant. Volkswagen said it might need roughly 50,000 further job cuts amid fierce Chinese competition and transatlantic trade pressures; this is one prominent sign of the wider adjustment facing German industrial employers. 9

The concern is therefore not just import penetration. Chinese companies are moving into the same higher-value categories—vehicles, capital goods and medical devices—where German and European firms expected to retain technological and pricing advantages. The Commission’s response combines resilience rules, “Made in Europe” preferences and possible trade-defence action.

Denis Redonnet is leading an EU negotiating team in Beijing for talks with China’s commerce authorities, including Vice Minister Ling Ji, seeking concrete steps to rebalance trade and address the surge of Chinese exports. 56

Ditte Juul Jørgensen, the Commission’s director-general for trade and economic security, has said she plans to travel to Beijing after Redonnet’s mission. She has described China as engaged in the talks, while stressing that the challenges are “very, very significant.” 14

The political deadline is October, when Trade Commissioner Maroš Šefčovič is expected to assess whether China has delivered “tangible results.” Absent progress, Brussels has indicated it may rely more heavily on unilateral trade-defence measures. 56

Meaningful structural change remains doubtful. Rebalancing would require China to alter policies that support industrial overcapacity, subsidised production and export-led growth—changes that go far beyond one-off purchasing commitments or a monitoring mechanism. China has also said EU talks cannot be based on one-sided demands. 5

Thus, the negotiations are best understood as both diplomacy and leverage: Brussels is testing whether Beijing will make credible concessions before October while preparing domestic industrial and trade instruments in case it does not.

The still-being-drafted “diversification instrument” is intended to require companies in critical sectors to expand their supplier base, reducing excessive reliance on China rather than necessarily requiring full reshoring. Its design, covered sectors, thresholds and enforcement mechanisms have not yet been publicly specified. Insufficient evidence is available on those details.

The proposed Industrial Accelerator Act complements this approach on the demand side: it mobilises public procurement and public incentives to support low-carbon, European-made products and net-zero technologies. 13

In practical terms, the Act would give European production a preference where public money is involved, supporting strategic manufacturing capacity and decarbonisation rather than operating as a blanket ban on Chinese imports. 135

The EU sees an untenable mix of strategic supply dependence and a growing Chinese goods surplus. In Germany, the China trade deficit had widened to €89.3 billion by late August, while German exports to China fell more than 12% year on year in the first half of 2026, to just under €37 billion. 67

China is no longer merely a low-cost supplier or export market: it is competing with German firms in cars, industrial machinery and increasingly sophisticated manufactured products, including medical technologies. That undermines the export-led business model of German manufacturers.

The automotive evidence is especially stark: despite EU countervailing duties on Chinese battery-electric vehicles from October 2024, the EU’s passenger-car trade balance with China turned negative in the first half of 2025, by €1.2 billion. 2

Job reductions are a political accelerant. Volkswagen said it might need roughly 50,000 further job cuts amid fierce Chinese competition and transatlantic trade pressures; this is one prominent sign of the wider adjustment facing German industrial employers. 9

The concern is therefore not just import penetration. Chinese companies are moving into the same higher-value categories—vehicles, capital goods and medical devices—where German and European firms expected to retain technological and pricing advantages. The Commission’s response combines resilience rules, “Made in Europe” preferences and possible trade-defence action.

Denis Redonnet is leading an EU negotiating team in Beijing for talks with China’s commerce authorities, including Vice Minister Ling Ji, seeking concrete steps to rebalance trade and address the surge of Chinese exports. 56

Ditte Juul Jørgensen, the Commission’s director-general for trade and economic security, has said she plans to travel to Beijing after Redonnet’s mission. She has described China as engaged in the talks, while stressing that the challenges are “very, very significant.” 14

The political deadline is October, when Trade Commissioner Maroš Šefčovič is expected to assess whether China has delivered “tangible results.” Absent progress, Brussels has indicated it may rely more heavily on unilateral trade-defence measures. 56

Meaningful structural change remains doubtful. Rebalancing would require China to alter policies that support industrial overcapacity, subsidised production and export-led growth—changes that go far beyond one-off purchasing commitments or a monitoring mechanism. China has also said EU talks cannot be based on one-sided demands. 5

Thus, the negotiations are best understood as both diplomacy and leverage: Brussels is testing whether Beijing will make credible concessions before October while preparing domestic industrial and trade instruments in case it does not.