The European Commission is developing new instruments to address macroeconomic imbalances, with European Commission President Ursula von der Leyen singling out the 'growing and unsustainable' trade deficit with China as the primary target. The announcement came at the closing press conference of the European Council summit, where EU leaders reportedly showed unified support for a more assertive European trade posture.

The Diversification Instrument

Von der Leyen described the proposed mechanism as a 'country-agnostic' diversification instrument, designed to help European companies in specific sectors reduce their dependence on single-source suppliers more rapidly. She acknowledged that supply chain diversification has so far been too slow. '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 said.

According to reports, the instrument would require companies to source critical components from more than one or two countries, eliminating chokepoints that could be 'weaponised' by adversarial states — a framing widely understood as a reference to China.

The Scale of the Problem

European Council President António Costa was direct about the urgency, describing the current trajectory as untenable. 'Our strategy is clear: de-risking, not decoupling, while we engage in dialogue,' he said. 'But we need to address the challenges we are facing. A €1 billion trade deficit per day is simply unsustainable. We cannot continue to raise these issues without any concrete results.'

The €1 billion-per-day figure underscores the scale of the structural imbalance that Brussels is now seeking to legislate against.

Divisions Within the Bloc

Not all EU member states back a harder line on Beijing. Germany, heavily reliant on Chinese export markets, and Spain, which has positioned itself as a gateway for Chinese investment into Europe, are both reportedly wary of provoking retaliation. China has already signalled it would respond to any escalatory measures.

Senior diplomats, according to reports, have stressed that maintaining open dialogue with Beijing is especially important given what they described as the 'erratic behaviour' of the US government and its assertive trade agenda — suggesting that some in Brussels see the China relationship as a hedge against transatlantic uncertainty.

France Pushes for Stronger Measures

France has been the most vocal advocate for robust tools to contain what it characterises as China's overcapacity and market-distorting subsidies. French officials have suggested the leaders' summit marks a decisive shift, with Brussels adopting a harder line on Beijing than at any point in recent years.

Von der Leyen, for her part, emphasised that dialogue with China remains crucial even as the EU moves to sharpen its defensive instruments — a 'de-risking, not decoupling' formulation that has become the bloc's official strategic vocabulary. Whether the new tools can bridge the gap between France's assertiveness and Germany's caution will be the central test of the initiative's credibility.