The European Commission's closed-door meeting on China exposed a bloc struggling to balance protectionist demands against the economic cost of decoupling from its second-largest trading partner.
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EU proposes 47% steel quota cut as China trade tensions escalate
The European Commission on Thursday convened all 27 member states to coordinate trade defenses against China, proposing a 47% cut in duty-free steel import quotas to 18.3 million tons effective July 1 as part of a broader protectionist push.
"The current trade and investment relationship is unsustainable," a European Commission spokesperson said, speaking on condition of anonymity during the closed-door session in Brussels.
The meeting, dubbed a "special session on China," asked each member state to document Chinese activity across 27 sectors spanning trade, agriculture, defense and health. Executive Vice President Stephane Sejourne told the Financial Times the EU would expand trade defense tools with systematic import quotas and tariffs targeting chemicals, metals and clean technology — sectors where Chinese exports have surged.
The measures threaten to upend 739 billion euros in annual EU-China trade, with Beijing warning it will retaliate. China's Commerce Ministry spokesperson He Yadong said Thursday that "if the EU discriminates against Chinese companies and products, China will take corresponding measures to safeguard its legitimate rights and interests."
Internal divisions deepen
France, Belgium, the Netherlands and Lithuania pushed for the hardest line, while Germany, Slovakia and the Czech Republic urged restraint, according to officials familiar with the discussions. Spain initially signed a French-drafted hardline position paper but withdrew support within days, underscoring the bloc's internal fractures.
The divisions reflect a deeper strategic anxiety. The EU faces industrial competitiveness decline, heightened security concerns and internal governance dysfunction across its 27 members, said Wang Yiwei, director of the European Union Research Center at Renmin University in Beijing. "The EU hopes to divert internal contradictions by taking a tough stance on China," he said.
Germany's Economy Minister Robert Habeck visited Beijing this week with 35 business leaders, seeking to expand cooperation rather than confrontation. German industry relies heavily on China as both a market and supply chain partner, with bilateral trade exceeding 240 billion euros in 2025.
Beijing's countermeasures
China has already begun pushing back. On May 15, the Ministry of Justice issued its first formal determination under the newly enacted Decree 835, finding that the European Commission's cross-border investigation into Chinese security equipment maker Nuctech under the EU's Foreign Subsidies Regulation constituted "improper extraterritorial application of foreign law." The decree, published April 7 alongside Decree 834 on supply chain security, empowers Chinese authorities to prohibit compliance with foreign measures deemed to harm China's sovereignty or development interests.
Chinese Ambassador to the EU Cai Run published an opinion piece in EUobserver on Thursday arguing that "the essence of China-EU economic and trade relations is mutual benefit and win-win cooperation." He noted that while China runs a goods trade surplus with the EU, the bloc maintains a services trade surplus, and much of the surplus is generated by European companies operating in China.
Market implications
The steel tariff changes carry significant economic weight. The new quota of 18.3 million tons represents a 47% reduction from 2024 levels, with over-quota tariffs doubling from 25% to 50%. The policy affects all trading partners but disproportionately hits China, the world's largest steel producer with 1.01 billion tons of output in 2025.
The last time the EU imposed comparable steel safeguards in 2018, Chinese steel exports to the bloc fell 28% over 12 months while European steel prices rose 15%, according to industry data. ArcelorMittal and ThyssenKrupp could face margin pressure from both reduced Chinese competition — which supports pricing — and potential Chinese retaliation against European industrial goods.
The June 18 EU leaders summit will determine whether the Commission's proposals become policy. Any final measures would require qualified majority approval from member states, a high bar given the current divisions. If enacted, the tariffs could push the EU's average effective tariff on Chinese goods above 10% for the first time since 2002, according to trade data compiled by the European Centre for International Political Economy.
This article is for informational purposes only and does not constitute investment advice.
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