EU-China trade deficit has hit ‘tipping point,’ warns von der Leyen

European Commission President Ursula von der Leyen will use her State of the Union speech on Wednesday to reiterate her warning over the EU’s ballooning trade deficit with China, as Brussels steps up negotiations with Beijing ahead of a key October deadline.

“Our trade deficit with China is now €1 billion euro — a day. It has reached a tipping point,” she was due to tell lawmakers in Strasbourg, according to her prepared remarks obtained in advance by POLITICO.

“Some say the second China shock is looming. But it’s already here. It shows in our communities and factories across our Union. It leads to de-industrialisation in the industrial heartlands of Europe. This is unsustainable,” she said.

“This is why we are engaged in a dialogue with China to rebalance our trade,” von der Leyen added. “But this dialogue must now lead to results. China’s weaker domestic demand means it also needs our European market. So, it is in both our interests to work together to find solutions.”

The Commission president’s speech gave no detail, however, on the actual steps Brussels was prepared to take to protect European industry from what it sees as unfair competition.

Brussels and Beijing are engaged in an intensifying sequence of talks, with the EU’s trade chief speaking with his Chinese counterpart on Thursday, and a team of senior trade officials expected in Beijing next week. Brussels is under pressure to deliver results in time for an October summit of EU leaders, including on trade defense instruments against subsidised Chinese exports.

“Let me be clear: we will use all tools at our disposal to rebalance our relationship. Words are good. But deeds are better,“ said the Commission president.