French President Emmanuel Macron and German Chancellor Friedrich Merz have called on the European Union to create a new legal framework that would enable the bloc to respond quickly to trade threats. In a letter to European Commission President Ursula von der Leyen, Macron and Merz emphasized the need for a credible instrument that would allow the Commission to take decisive action in the event of a trade war. This move comes as the EU faces growing trade tensions with China.
The proposed tool could be used to cut off access to the European single market if needed, and would not require approval from all 27 EU countries. Instead, a weighted majority of states could block the action. The letter was sent just days before the EU trade commissioner visits Beijing to address trade frictions. The EU's biggest trade concern is its significant deficit with China, which reached around 360 billion euros last year.
Germany and France want to give the Commission the power to respond to trade aggression within days. The new tool could be deployed in a trade war, for example if a country were to cut off supplies to critical raw materials. The EU's current tools are not considered effective enough, particularly compared to the United States and China, which can retaliate faster and more robustly in a trade war.
The EU is already working on new tools to protect its industries, including a European equivalent of Section 301, a trade tool used by the United States to probe foreign practices it deems discriminatory and retaliate with tariffs. Macron and Merz are expected to present their ideas at an EU leaders' summit next week in Brussels. The proposed tool could be used against any country, but the EU's focus is on its trade deficit with China.
European companies say they are undercut on prices by Chinese rivals in sectors such as steel for wind turbines, semiconductors, and batteries. The EU also depends heavily on Chinese supplies of critical raw materials. The bloc's trade deficit with China is inflicting damage on key European sectors, according to Brussels.
Macron and Merz also want a new tool to reduce European dependencies on critical raw materials. The proposed instrument would enable the EU to take action to mitigate the impact of trade wars on European industries. The EU's goal is to create a more effective and rapid response to trade threats, particularly from countries like China.
The EU leaders' summit next week in Brussels will provide a platform for Macron and Merz to present their ideas and push for a more robust EU trade policy. The outcome of the summit will be closely watched, as the EU seeks to address its growing trade concerns and create a more level playing field for European industries.
Key points
- France and Germany are pushing for a new EU rapid response tool to address trade threats, particularly from China.
- The proposed tool would enable the EU to take decisive action in the event of a trade war, including cutting off access to the European single market.
- The EU's trade deficit with China reached around 360 billion euros last year, and the bloc is seeking to reduce its dependencies on critical raw materials.
