France and Germany have proposed new powers for the European Commission to counter market distortions as the European Union confronts mounting trade pressure from China. In a letter sent on Monday to Commission President Ursula von der Leyen, accompanied by a policy paper on global economic imbalances, Paris and Berlin called for tools to restrict access to the EU market, diversify supplies and prepare for possible retaliation. Brussels describes its economic relationship with Beijing as unsustainable, noting that the EU trade deficit reached an estimated €1 billion a day in 2025. The bloc has given China until this month to offer concessions.
The issue is scheduled to come before EU leaders at the European Council summit next week, where France and Germany will press for urgent action. The letter, signed by French President Emmanuel Macron and German Chancellor Friedrich Merz, states that a comprehensive framework is needed to complement the existing toolbox with new legal instruments in a lean and non-bureaucratic manner. The accompanying paper warns that a massive industrial shock is hitting sectors central to the European economic model, specifically naming pharmaceuticals, aerospace, automotive, industrial machinery and chemicals.
The proposal calls for a new instrument to be activated when third countries seek to undermine the restoration of a level playing field and fair market conditions by political or economic means, leading to severe and systematic distortions. This tool would restrict access to the European single market, which Paris and Berlin consider the primary leverage of the EU in negotiations with China. The two leaders want decisions to be taken swiftly through a procedure known as comitology, in which member state representatives scrutinise Commission measures. Crucially, the instrument would be activated unless a qualified majority is opposed, making it easier for the Commission to act.
The policy paper states that the tool should be country agnostic, capture all market distortions ranging from a single production to a whole sector, and cover everything from subsidies to currency manipulation. The aim is to enable the Commission to devise tailor-made solutions reflecting EU interests without placing obligations solely on European companies. Furthermore, the letter calls for a diversification instrument previously announced by von der Leyen at the European Council in June. According to the paper, this instrument should reduce European dependencies, resolve existing supply chain concentration, and prevent emerging concentration risks by considering import concentrations from a given country, company, or stakeholder nationality, alongside global market share.
The paper acknowledges that retaliatory measures are likely to test political unity within the EU and that maintaining a united front will be crucial in any trade war with China. It states that the EU must be prepared, factor in international reactions and potential retaliations to its policies, and understand the extent and variety of coercion. The proposal requests an inventory of possible retaliatory measures, an assessment of their impact on each member state, and coordination among EU leaders. Additionally, the paper calls for measures to reduce risks and sever dependencies, urging the Commission to launch more investigations on its own initiative and reallocate staff and resources to support trade defence instruments. It also advocates a broader approach to sector-wide trade disputes, noting that protection for narrow categories of goods is now insufficient against systemic distortions and global dominance across entire value chains. Finally, Paris and Berlin propose targeted changes to anti-dumping, anti-subsidy, and safeguard rules to make it harder to circumvent EU trade measures.
