Key Points:
- A coalition of five EU nations—Spain, France, Italy, the Netherlands, and Lithuania—formally demanded stricter trade defense instruments.
- The joint paper warns that industrial overcapacity and unfair trade practices cost the European manufacturing sector 1 million jobs between 2019 and 2025.
- The proposals include faster emergency tariffs, anti-circumvention powers, and a new “resilience tool” to penalize highly concentrated sources of supply.
- Germany, which accounts for nearly 40% of all EU exports to China, refused to sign the paper due to fears of Chinese retaliation.
A powerful coalition of European Union member states is pushing Brussels to adopt a significantly tougher trade regime to protect domestic industries from foreign competition. Spain, France, Italy, the Netherlands, and Lithuania have circulated a joint paper ahead of a highly anticipated European Commission meeting scheduled for Friday, May 29, 2026. The paper demands a rapid, aggressive crackdown on what the signatories describe as “systemic and structural industrial overcapacity” and “unfair trade practices.” While the document does not explicitly name any countries, European officials routinely use these phrases as shorthand for China.
The five nations warn that the influx of low-cost, state-subsidized imports has already dealt a severe blow to the European manufacturing sector. According to the joint paper, unfair trade barriers and massive foreign overcapacity have directly contributed to the loss of 1 million industrial jobs across the European Union between 2019 and 2025. This job loss occurred as Europe’s trade deficit with China widened to an unsustainable €360 billion (approximately $388 billion) in 2025, translating into an ongoing trade deficit of more than $1 billion per day.
To defend European factories, the coalition proposed several radical reforms to speed up and simplify the EU’s trade defense arsenal. Currently, the European Commission takes months to complete traditional product-by-product anti-dumping investigations, allowing cheap imports to flood the market in the meantime. The joint paper argues that these slow, narrow-scope measures are no longer sufficient. Instead, the countries want the Commission to quickly deploy broad, sector-wide safeguard tools that can levy emergency tariffs of 50% or more on imports in the event of sudden trade surges.
Additionally, the paper targets the growing problem of trade circumvention. Many foreign firms successfully evade existing European duties by shipping parts through third countries or by establishing simple assembly facilities within the EU. To combat this, the five nations want the Commission to tighten local content rules and impose aggressive anti-circumvention tariffs directly on individual companies rather than on entire countries. They also called on Brussels to hire more trade officials to clear a massive backlog of industry complaints.
Perhaps the most innovative proposal in the document is the creation of a new “resilience tool” or “resilience instrument.” Under this mechanism, the European Commission would monitor global supply chains and automatically impose protective tariffs or import quotas when European sources of critical materials become concentrated beyond a safe threshold. The tool prevents European industries from relying too heavily on any single foreign nation for vital inputs, encouraging companies to diversify their supply lines.
However, the aggressive proposals have exposed a deep, long-standing rift within the 27-nation bloc. While some countries advocate for immediate toughness, Germany has notably refused to sign the joint paper. As Europe’s largest economy, Germany carries by far the highest exposure to the Chinese market. German manufacturers account for nearly 40% of all EU exports to China and supply over 20% of its imports, with major industrial brands like Siemens and Volkswagen heavily invested in Chinese manufacturing facilities.
Fearing swift economic retaliation from Beijing, Berlin is leading an informal coalition of northern, export-oriented economies—including Sweden and Finland—that favors a more conciliatory, negotiated approach. German business leaders worry that aggressive European tariffs on Chinese goods would prompt Beijing to restrict market access for European machinery, chemicals, and automobiles. This retaliation would severely damage Germany’s already fragile economic recovery, forcing its manufacturing sector to bear the brunt of a geopolitical trade war.
Meanwhile, Beijing has reacted with anger to the leaked document. Chinese state media and academic experts criticized the joint paper, calling the accusations of overcapacity a “classic victimhood narrative” designed to mask Europe’s own failures to implement internal structural reforms. Chinese trade officials warned that any move by Brussels to erect fresh trade barriers would severely damage bilateral trade relations. They urged the EU to focus on technological cooperation and economic pragmatism rather than resorting to protectionist trade weapons.
As EU trade commissioner Maroš Šefčovič prepares to host Friday’s critical orientation debate in Brussels, the lack of a united front remains the bloc’s greatest vulnerability. While France and Italy want to deploy a protective “trade bazooka,” Germany’s caution could easily dilute the Commission’s combative instincts. Navigating this internal division will be the defining challenge for EU leaders at their upcoming June summit, where they must decide whether to forge a truly united front or allow internal splits to weaken Europe’s collective trade leverage.
