EU Leaders Set to Order Brussels to Build New Trade Tools Against China

European Union leaders meeting in Brussels this week are expected to instruct the European Commission to develop new trade tools aimed at the economic imbalances tied to Chinese industrial policy, according to a draft summit statement still being negotiated ahead of the European Council gathering on Thursday and Friday.

The instruction follows an unexpected understanding reached in Beijing earlier this month, when EU Trade Commissioner Maros Sefcovic agreed with Chinese counterparts to moderate exports of hybrid and plug in hybrid vehicles to the bloc. The arrangement sets an initial quota of around 350,000 Chinese built hybrids a year, rising by 6 percent annually, a ceiling officials say could cut those exports by more than half from current levels. It also includes steps meant to improve access for European goods inside China.

Officials call the car deal a start, not an answer

Despite the agreement easing the immediate threat of a trade war over vehicles, EU officials and diplomats have described it as insufficient on its own. The bloc's trade deficit with China, which officials put at roughly one billion euros a day, extends well beyond cars into electronics, machinery, solar equipment and other manufactured goods, and the bloc intends to keep pressing Beijing to restrain exports across those sectors as well.

That broader goal is what leaders are expected to hand to the Commission this week: a mandate to design instruments, beyond the vehicle quota already agreed, for managing a trading relationship that member states increasingly view as structurally out of balance. Belgium hosts the summit as home to the European Council's headquarters, placing the country at the center of a negotiation whose outcome will be set largely by institutions based in its own capital.