Europe’s Hardening Stance Against China Is Washington’s Opportunity

Europe is beginning to confront the economic costs of China’s market-distorting practices in earnest. On October 7, the European Parliament voted overwhelmingly to adopt a much tougher stance on China. The position calls Beijing’s industrial policies “an existential threat to the EU” and urges the European Union to “proactively and assertively” use its trade toolbox alongside “like-minded partners,” including the United States.

While the resolution is not law and does not formally change EU policy, it outlines the parliament’s concerns about China and lays out options for responding if trade talks with Beijing fail. That support strengthens the hand of EU Trade Commissioner Maros Sefcovic as he enters another round of negotiations on October 8.

Europe Reaches Its Limit

Brussels’s concerns are clear. The European Union’s goods trade deficit with China now exceeds $1.2 billion a day, up from $320 million a day in 2013. European Commission President Ursula von der Leyen told the European Parliament in September that the second China shock is “already here,” pointing to manufacturing job losses, factory shutdowns, and deepening supply-chain dependencies.

Member states are already working to sharpen the EU trade toolkit to back Parliament’s resolution to lean more heavily on trade tools to “address the unbalanced EU-China trade relationship.” On October 5, Germany and France proposed a new trade instrument that would let Brussels respond rapidly to “systemic market-distorting practices,” including dumping and subsidies, currently crippling European industry. Details remain scarce, but it would reportedly allow measures “up to an immediate cut-off from the internal market” if the bloc faces restrictions on vital supplies.

China Denies Market Distortions

China accounts for roughly 30 percent of global manufacturing value-added and is projected to reach 45 percent by 2030. Beijing has directed much of this growth toward strategic sectors through state subsidies and preferential state contracts, producing more than its market can absorb and selling the excess goods abroad at prices that do not reflect the true production cost. These practices undercut foreign competitors and hollow out manufacturing worldwide while also giving Chinese firms outsized control of key sectors — including critical minerals, rare earths, and shipping — that Beijing uses as geopolitical leverage.

Beijing, however, denies that its “so-called excess capacity” is a problem. This denial signals it has no intention of curbing the policies driving the global market distortions, even as the US-China Economic and Security Review Commission warns that this economic model “poses a direct risk to U.S. competitiveness and the resilience of global markets.”

The G20 shows the same pattern. At the September 1 meeting of G20 finance ministers and central bankers in Asheville, North Carolina, 19 of 20 members endorsed a Chair’s Statement on the risks of trade, but China’s dissent blocked an official joint statement. The October 1 trade ministerial meeting in Milwaukee, Wisconsin, also ended without consensus on structural overcapacity. The following week, the United States, European Union, and 13 additional aligned economies, issued a joint statement committing to work on the problem without China.

United Against China To Build a Near-Global Economy

As allies bolster their own economic security tools and adopt a tougher stance against China, now is the time to build coalitions. China’s non-market practices harm all market and rules-based economies, not just that of the United States. The United States is the world’s most powerful economy, but acting in concert with others only strengthens its hand against Beijing. Washington should work with the European Union and other aligned partners to turn these parallel moves into a coordinated response and lay the foundation of a Near-Global Economy: a trade and customs union built on market principles, enforced laws, geopolitical stability, and shared costs and opportunities. The signatories of the September G20 Chair’s Statement and October’s joint statement could be a start.

The G20 could still play a role through its private-sector counterpart, the B20. The B20’s trade task force could lead a private sector coalition to align strategies and coordinate supply-chain diversification away from China and toward alternatives insulated from geopolitical risk.

Elaine Dezenski is senior director and head of the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). Susan Soh is a research associate for the CEFP at FDD. For more analysis from Elaine, Susan, and FDD, please subscribe HERE. Follow Elaine on X @ElaineDezenski. Follow Susan on X @SusanSoh827. Follow FDD on X @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.