China warns of retaliation as EU weighs new trade defence tool

China's ambassador to the European Union has warned that Beijing would retaliate if Brussels adopts restrictive measures against Chinese interests. The warning comes as the European Commission considers a new trade defence instrument designed to respond more quickly to market disruption linked to imports. The proposal has been described as a fast-response mechanism that could limit access to the EU market in certain circumstances.

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Cai Run said China opposes what he called the politicisation of economic and trade issues, the stretching of security concepts, and the use of unilateral pressure. He added that if the EU insists on restrictive and discriminatory measures, China would take countermeasures to safeguard its interests. The comments were made on Thursday, according to the supplied report, as the Commission continued work on the tool.

The issue matters because the EU is facing a record trade deficit with China, estimated in the report at €1 billion a day. The same report says low-cost Chinese imports have risen by 25% over the past year, according to Chinese customs data. Brussels is seeking ways to protect its market, while also trying to avoid a broader breakdown in trade relations with Beijing.

The planned instrument was tasked to the Commission by EU leaders last October, after they asked for a mechanism that could be deployed rapidly against countries whose political or economic actions have serious repercussions for the EU market. EU Trade Commissioner Maroš Šefčovič told members of the European Parliament on Wednesday that the tool should be presented by the end of the year. He said it would allow the EU to react much faster, including by limiting exports into the European Union.

Although the tool is presented as country-agnostic, the report says it would directly affect Chinese interests because of the scale of China's exports to the EU's 450 million consumers. France and Germany pushed for such an instrument in early October, as all EU member states now face a trade deficit with Beijing, according to the report. The move came amid negotiations between Brussels and Beijing that began in June with the aim of rebalancing trade relations.

The latest tensions also follow a deal reached on 9 October to reduce Chinese imports of hybrid cars into the EU. Since then, technical talks between EU and Chinese officials have resumed, with Brussels hoping to reach similar agreements in other sectors. What remains unclear is how far the Commission will go in the final design of the tool, whether it will be used, and how Beijing would respond if it is adopted.

The next key point to watch is the Commission's expected presentation of the proposal by the end of the year.

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