France and Germany have urged the European Commission to create a faster EU instrument for responding to market distortions linked to China, as pressure grows to reduce strategic dependencies and strengthen Europe’s trade defences.
The proposal is set out in a letter from French President Emmanuel Macron and German Chancellor Friedrich Merz to European Commission President Ursula von der Leyen. It is accompanied by a policy paper on global economic imbalances and is expected to feature in discussions at the next European Council summit.
What France and Germany are proposing
Paris and Berlin want the European Commission to have access to a new “systemic reaction” tool that could respond to severe and sustained distortions affecting the EU single market. The measure would be designed for situations in which a third country uses political or economic means to undermine fair competition.
The proposed instrument could allow the EU to restrict access to its market, apply targeted remedies and develop responses tailored to the circumstances of a particular dispute. France and Germany argue that the single market is the bloc’s most powerful economic leverage in negotiations with China.
The tool would be:
- Available for distortions affecting an individual product, company, sector or wider value chain;
- Designed to cover measures including subsidies and possible currency manipulation;
- Country-agnostic, meaning it would not be aimed exclusively at China;
- Activated through a rapid comitology procedure involving member-state representatives;
- Structured so that action could proceed unless a qualified majority opposed it.
The proposal is not an adopted EU law. It is a political request to the European Commission and will require further institutional consideration before any new legal instrument could take effect.
Why China is at the centre of the debate
The initiative comes as the European Union reassesses its economic relationship with Beijing. The policy paper warns that European industries face what it describes as a major industrial shock, with pharmaceuticals, aerospace, automotive manufacturing, industrial machinery and chemicals among the sectors exposed to international competition and concentrated supply chains.
The European Commission has described the EU-China economic relationship as unsustainable and has pressed Beijing for concessions. According to the source material, the EU’s trade deficit with China was estimated at approximately €1 billion per day in 2025. The Commission has given China until October 2026 to offer concessions, although the precise outcome of that process remains subject to negotiation.
The debate is part of wider EU trade policy and economic-security discussions. Member states are seeking to protect European industry while maintaining access to global markets and avoiding measures that would unnecessarily increase costs for businesses or consumers.
Supply-chain diversification is another priority
France and Germany are also calling for a stronger diversification instrument. The aim would be to reduce dependence on highly concentrated sources of imports and identify emerging risks before they become disruptive.
The proposed framework would consider factors such as:
- The concentration of imports from a particular country;
- The role of individual companies or ownership groups;
- Global market shares and control of critical supply chains;
- Risks extending beyond traditional trade disputes.
This approach reflects the EU’s broader economic-security agenda. Rather than focusing only on tariffs or individual products, the two governments want Brussels to examine vulnerabilities across entire sectors and supply networks.
Planning for possible retaliation
The policy paper also calls for the European Union to prepare for possible retaliation against future trade measures. France and Germany argue that any response from Beijing could test political unity among the 27 member states.
They propose creating an inventory of potential retaliatory actions and assessing how those actions could affect individual countries. That could help EU leaders coordinate responses and reduce the risk that a measure aimed at one member state would create divisions across the bloc.
The proposal highlights a central challenge for EU trade policy: the European Commission negotiates and enforces many common trade measures, but the economic effects are often distributed unevenly among member states and industries.
Calls to strengthen EU trade-defence tools
Paris and Berlin are also asking the Commission to make greater use of existing trade-defence instruments, including anti-dumping, anti-subsidy and safeguard investigations.
The paper recommends that the Commission:
- Open more investigations on its own initiative;
- Reallocate staff and resources to support trade-defence work;
- Address disputes affecting entire sectors rather than narrow product categories;
- Limit opportunities to circumvent EU trade measures.
The governments argue that protecting only a limited category of goods may be inadequate when distortions affect a complete value chain. Their proposal would therefore encourage a broader assessment of industrial competition, subsidies and supply-chain dominance.
What happens next?
The proposal is expected to be discussed by EU leaders at the forthcoming European Council summit. That discussion would provide political direction, but it would not by itself create new binding powers for the European Commission.
Any formal legal instrument would need to follow the appropriate EU process. Depending on its design, this could involve a Commission initiative, consultation with member states and possibly approval by the Council of the European Union and the European Parliament.
For Ireland and other member states, the debate could have implications for exporters, importers and companies that rely on global supply chains. However, the practical effect will depend on whether the proposal advances, what legal form it takes and how any future measures are applied.
Conclusion
France and Germany are pressing for a faster and broader EU response to China-related market distortions, combining new Commission powers, supply-chain diversification and stronger trade-defence procedures. The proposal remains at the political and policy-discussion stage, with the next major step expected at the European Council summit. Any future EU news developments will depend on whether member states can agree on how far Brussels should go in using the single market as leverage.
