Europe’s time to say no
Thirty years ago, a group of Chinese nationalist authors wrote a bestseller, “China can say no”, a polemic urging the country’s leadership to refuse subordination to a US-led order. Beijing soon curtailed its circulation, but the book’s spirit runs through Xi Jinping’s focus on national strength, autonomy and self-reliance.
China has had remarkable success in persuading European policymakers that this is not an answer they can give, too, even as the case for it grows. Beijing’s economic policies are fuelling the continent’s deindustrialisation, Europe’s supply-chain dependencies on China leave it exposed to coercive pressure and debilitating shocks, and China’s support for Russia magnifies Europe’s biggest security threat. These dynamics are reinforcing each other, too. As Europe loses its industrial capacity, its dependencies deepen and its vulnerabilities worsen.
Yet according to Beijing, every move to protect the functioning of the free market is protectionism; China’s industrial domination is inevitable; and even the most basic level-playing-field measures amount to starting a trade war. The real problem, the story goes, is that Europeans just need to work harder and deregulate.
As a result, Europe’s policymakers have serially deferred action. This is partly the product of active campaigns from Beijing, which is even more adept at distorting Europe’s political choices than it is its markets. But it mostly reflects a set of stories Europeans have been telling themselves, which veered from complacency to fatalism at remarkable speed.
China’s threats have reinforced this caution. Unnerved by Beijing’s success in facing down the Trump administration’s tariff escalation, European leaders have been wary of even considering steps they fear might spiral out of control. Where Europe has responded, it has been endemically reactive; by the time the policy is moving in the right direction, the facts on the ground have moved in the wrong direction faster.
Recently, however, it has become clear that this cannot continue. With entire sectors being hollowed out and Beijing’s plans to dominate the technological transition advancing, continued inaction would lock Europe into an accelerated decline. Policymakers will go into the June 2026 European Council meeting with a new sense of urgency.
But knowing they must say no is not the same as knowing how. This paper sets out that the answer is to make Europe’s system into its power—to turn its regulatory standards, market rules, transparency requirements and coalition structures—into leverage, underpinned by the weight of the single market. The aim is not to wait for Beijing to change course, but to change the market logic that makes its current behaviour profitable.
The approach rests on six conditions of access—the Six Nos—that translate Europe’s existing principles into a coherent framework. Their purpose is not to raise the cost of unfair behaviour at the margin but to alter the structure of the market itself, turning its high standards from a self-imposed cost into a strategic advantage. The paper lays out the case for these conditions: how to enforce them quickly, how to make them permanent, how to scale them with like-minded partners, how to ensure they survive contact with China, and how they should set the priorities for Europe’s wider competitiveness agenda.
The EU’s most effective new instruments, however, remain years from full implementation, and there is no time to waste. So the paper also proposes implementing these principles through a swarm of emergency measures. These would use many of the EU’s existing instruments simultaneously, deployed at high intensity, and concentrated where it counts—from safeguards to subsidy investigations—rather than any single high-visibility measure, such as a large across-the-board tariff, that gives Beijing an easy focal point for retaliation.
European policymakers should nonetheless assume that China will test the strategy with coercive pressure. If it does, the EU should invert the instinct to treat China’s coercion only as a problem to fend off and see it as an opportunity too. It can use it as a chance to consolidate instruments and authorities into lasting capacity, build negotiating space and reset the relationship on firmer terms.
This framework will inevitably mean higher costs in some sectors, exposure for exporters and require support for industries that cannot recover overnight. But much of what is called the “cost” of resilience is the overdue price of risks the market has failed to recognise—and which Europe has been paying already through repeated shocks. The costs of inaction are higher still.
Sustaining this approach will depend on European leaders’ political will. That will be easier to generate and maintain when they believe the measures will work, the principles are worth defending and the framework can withstand Chinese pressure. It will also be easier when the approach is rooted in the comparative advantages of the European system itself.
The reckoning
European industry is being hit by the strengths and weaknesses of the Chinese economy at the same time. State-backed firms with vast scale, falling costs and accelerating technological sophistication are tough competition, while stagnant Chinese demand, deflation and chronic overcapacity push its output into Europe.
In the first quarter of 2026, China recorded its largest-ever trade surplus with the EU—$83bn, on $148bn of exports against $65bn of imports, according to Beijing’s own figures—with the bloc now accounting for some 31% of China’s entire goods-trade surplus. But these figures still understate the impact: at deflated prices, the volume of Chinese imports has grown even faster.
Europe’s industrial core is feeling the pressure. The French planning agency has assessed that a quarter of French exports, one-third of German exports and two-thirds of German domestic production are directly threatened by Chinese competitors, with “entire segments of European industry” liable to collapse within a few years. The Rhodium Group consultancy estimates that half of all German manufacturing jobs are now at risk, and that the EU is losing 500 manufacturing jobs a day to inadequate defences against Chinese competition.[1]
Europe’s industrial difficulties are certainly not all China’s doing. Also weighing heavily are high energy costs, weak post-pandemic demand, monetary tightening, fragmented capital markets and regulatory burdens. Some of these things are self-inflicted, some cyclical. But until recently China barely featured in the European competitiveness debate, and when it did, it was only one trade irritant among many. Influential companies complained about regulations, climate targets and energy prices all while staying silent on China. At times, they actively lobbied against basic security, trade-defence and industrial-policy measures. This fostered the illusion, especially in Germany, that if Europe simply deregulated, slowed its electrification ambitions, signed a few more trade deals, improved its product offers and strengthened European access to the Chinese market, the rest would take care of itself.
The effects are as much political as they are economic. The “first China shock” of the 2000s, when cheap Chinese goods overwhelmed Western markets, did lasting political damage: the speed and geographic concentration of the economic hit led to a measurable growth in political extremism in the affected regions, and far-right parties in particular. The same pattern is visible in Germany’s industrial districts. The damage is difficult to attribute. It is easier for populists to blame the government, immigration or the energy transition than a competitor they never see, so the political costs are rarely traced to their cause.
Where the first shock hit lower down the value chain, this one is rippling through the higher-value production of Europe’s industrial core. This time, these regions cannot move up the value chain to escape it. China is targeting precisely the sectors—advanced automation, robotics, new materials—that would have been the next phase of Europe’s industrial evolution. The continent stands to lose entire industrial ecosystems on a scale that has made observers reach for new analogies: more a steamroller than a shock.
In a vicious cycle, this deindustrialisation is deepening Europe’s dependency. China accounts for around 30% of world manufacturing and is projected to reach 45% by 2030, with monopoly or near-monopoly positions across critical-minerals processing, permanent magnets, solar, batteries, drones and key pharmaceutical inputs. Europe’s reliance on these reaches as far as defence, where rearmament depends on Chinese products, including magnets and critical minerals. Beijing has already begun to restrict these exports, leaving European defence capacity hostage to the decisions of Moscow’s strategic partner.
Meanwhile, by supporting Russia’s war economy, Beijing is enabling the very threat Europe is rearming against. This support has mainly consisted of dual-use supply: the components, machine tools, microelectronics and industrial inputs that have allowed Russia to sustain military production under sanctions. But since mid-2025, the relationship is extending into military-industrial cooperation on the capabilities likely to matter most in a future conflict with Europe—including drones and electronic warfare. Thanks to China, Europe’s ability to sustain a prolonged confrontation on robust industrial foundations is weakening just as the capacity sustaining its main adversary grows.
Finally, these same dependencies create latent vulnerabilities for Europe. Connected systems—including grid inverters and transformers, legacy Huawei and ZTE equipment, COSCO-linked port concessions and connected vehicles—mean Beijing can disrupt or hold at risk the systems on which daily life depends, especially where remote access, software updates, telemetry and cloud dependence are involved. Some member states have begun to treat these as wartime vulnerabilities and are moving to rip out high-risk suppliers. Others, however, remain on a peacetime footing, with plans to phase out such suppliers distant or non-existent.
Beijing no longer even pretends to be willing to negotiate seriously over these trends. At any suggestion that Europe might defend its industries or reduce its vulnerabilities, it is dismissive at best and threatening at worst. After years of European warnings about the economic imbalance and the cost of backing Russia went unmatched by serious action, Beijing has learnt that Europe may complain, but it can be coerced into delay.
Covenants without the sword
Facing such a reckoning, in the last year or so the EU has begun to change tactics and assemble the building blocks of a new China policy package. Europe is unlikely to adopt these formally as a new China strategy, and it does not need to. The diagnosis already exists: the 2019 strategy crystallised a consensus about Beijing as a systemic rival and the European Commission president has since given a clear account of the system-level challenge. The language is there and so are most of the instruments. From major legislative proposals such as the 2026 Industrial Accelerator Act (IAA) and 2026 revisions to the Cyber Security Act (CSA), the EU has made a flurry of moves in which China, though often unnamed, is the main target. The lack of fanfare is intentional; officials have characterised the approach as “say less, do more.”
Some of these moves are ambitious in scope, especially if they are adopted and implemented in their most expansive form, from “Buy European” provisions to security restrictions that would lock Chinese firms out from certain sectors. They have also happened quickly. The commission’s decision to cut EU funding from energy projects using inverters from China and other high-risk states moved forward in a matter of weeks. When combined with some of the most effective tools to counter Chinese practices, such as the 2023 Foreign Subsidies Regulation (FSR) the elements of a rebalanced European approach are already taking shape.
But the execution of these policies has not caught up with the analysis. Europe still largely deals with China as though it were a normal commercial actor to be lobbied, negotiated with and occasionally subjected to a trade-defence measure or subsidy investigation rather than as the systemic rival the EU says it is. Much of this is because member states, wary of retaliation and subject to lobbying from firms with strong market and supply-chain dependencies on China, have not backed a more assertive line. But part of it is that the commission itself has not put forward a fully systemic approach, instead advancing a set of distinct initiatives it has not welded into a strategically disciplined framework.
Lacking an overarching strategy, these efforts remain siloed. Major gaps are present in the timetables before legislation kicks in and some at-risk industrial sectors remain exposed. What is more, whole categories of risk fall between instruments. For example, the EU lacks a tool specifically designed to address the concentrated, firm-level sourcing from China that drives Europe’s dependencies. So, while the EU’s recent policy momentum is promising, it is not yet close to taking on the spectrum of challenges that China brings.
There is also a strong chance that the pattern will repeat itself, especially if some member state governments are fearful of China’s response to a more coherent approach. The tasks ahead of the EU—adding new trade tools, putting defensive measures in place, closing implementation gaps and readying the Anti-Coercion Instrument (ACI)—are essential. But each addresses the same problem in a different form, and there are not enough better-tailored tools. Beijing has absorbed, adapted to or circumvented Europe’s responses when policymakers have mounted them one product and one sector at a time, each addressing the symptom it was built for while the dynamics driving it moved on to the next front.
A party state is built to absorb costs that would deter a commercial actor: it can direct firms to swallow tariffs, sustain loss-making production and hold positions for strategic rather than commercial reasons, for as long as leaders judge the objective to be worth it. Each instrument that works by raising the cost of a behaviour at the margin is playing where China is strongest. And each time European policymakers discuss how to respond, they do so against a backdrop of deeper dependencies, greater industrial pressure and diminished leverage. The question is how to break the cycle.
The imitation trap
One answer might be to try to beat China at its own game. This great power envy could see the EU trying a “reverse Deng”: extracting technology from foreign firms, loosening antitrust rules, matching China’s subsidies and industrial targets, and building a more centralised and controlled economic system. Or perhaps the EU might take its cue from America and reach for large-scale tariffs or unilateral export controls.
But Europe should not attempt to outmuscle its opponents in contests it is bound to lose. Beijing’s methods work because a one-party state stands behind it. Chinese policymakers can direct firms and capital, absorb losses and hold positions for purely strategic gain, and conduct the kind of extra-legal political warfare that Europe cannot. Washington’s sharpest instruments rely on a unified executive that can impose controls at speed, exploit the reach of the dollar, and draw on a deep intelligence picture fused with the authority to act on it.
There are good reasons to doubt, for instance, whether Europe could extract from Chinese firms what China once extracted from European companies. Beijing is now actively restricting the outbound flow of its technology, tightening controls over personnel, intellectual property and data precisely to prevent leakage. It also has decades of experience on the other side of this exchange–engineering and politicising technology transfer—that Europe cannot match. It would keep its willingness to use investment promises and threats of withdrawal for overtly political ends.
Europe can narrow some gaps by borrowing from the most effective American and Chinese tools. But it will not be able to close them because it runs counter to how the EU works. Instead, Europe has a different kind of strength altogether. It lies in the way its member states act together, and in the institutions that let them turn collective decisions into durable, legitimate rules. This is all underpinned by the world’s largest single market. That capacity is what allows Europe to embed standards in global production systems by turning access to its market into terms that others have to meet. Used deliberately, that system is a strategic instrument in its own right.
The principles
In some rare cases, the EU has fought on its own terms successfully by setting conditions the Chinese system struggled to satisfy. Together they point to what a more coherent strategy could look like.
The clearest example is the FSR. Chinese firms often win in Europe due to advantages that are invisible on the balance sheet. This includes cheap loans from state policy banks, support shuffled between arms of the same conglomerate and inputs bought below market price. The FSR forces these into the open. Any firm bidding for a large public contract must declare the state financial support it has received, and an investigation can require it to document the whole structure behind it. For a Chinese company, that means putting on the legal record the structures Beijing prefers to keep hidden. In several cases, Chinese companies have withdrawn within weeks of an investigation being opened.
The same logic also holds in the security domain. The EU addressed the threat from Chinese telecom vendors in its 5G network through criteria that firms subject to authoritarian-state intelligence laws, like Huawei and ZTE, structurally could not satisfy. It holds for reciprocity too: the International Procurement Instrument (IPI) rests on the straightforward proposition that Chinese firms should not compete freely for public contracts in the EU while European firms are systematically excluded in China. In each case the principle is the same. That is, access to the European market carries conditions, and in each case the condition is one a transparent market actor can meet but an opaque, state-directed one cannot.
These cases exemplify a set of principles Europe should make explicit, defend openly and then drive through the entire framework. They are not a clever trick to keep Chinese firms out. Some Chinese firms will meet them; others will not, or could not without ceasing to be instruments of the party state. The aim is less to penalise individual transactions than to change the incentives across the market, so that operating transparently becomes the easier way to do business in Europe. The common principle is that access to Europe’s market requires a level of reciprocity, transparency and security compatibility that does not currently exist with China. Applied consistently, that principle resolves into six conditions, the Six Nos.
The Six Nos
- No double standards: Third-country firms should receive no greater access to the European market than European firms receive in theirs.
- No rigged competition: Firms competing in Europe should do so on market terms, not through state subsidies or by evading standards European producers must meet.
- No monopolies: No single foreign supplier should be able to cut-off or weaponise a strategic supply chain.
- No backdoors: Products connected to European networks, or capable of receiving remote updates, must meet verifiable security standards.
- No black boxes: Firms operating in strategic sectors must disclose ownership, financing and state affiliations.
- No threat enablers: Access to the European market, supply chains or financial systems should not extend to firms supporting hostile military or coercive activity against Europe.
None of these conditions are China-specific but all of them have very clear applications when it comes to the structural challenges that the Chinese system poses to Europe. In practice, the trajectory of Chinese policy breaks each one of them. Market access is becoming less reciprocal as China becomes more self-reliant. Chinese subsidies are growing larger and harder to trace, increasingly embedded in guidance funds and local-government support mechanisms. China is deliberately deepening Europe’s dependencies and converting them into leverage, as its rare-earth and magnet restrictions show. Its intelligence and data-security laws are closing the gap between the state and technology vendors. Meanwhile, transparency is shrinking, with due-diligence firms raided, the counter-espionage law expanded and commercial data increasingly restricted. And to top it off, Beijing’s support for Russia has deepened behind a widening counter-sanctions architecture.
The Six Nos translate into distinct agendas for action:
- reciprocity rules for market access;
- fair-competition tools against subsidised overcapacity;
- diversification requirements for chokepoints;
- trusted-vendor standards for connected infrastructure;
- transparency obligations for strategic sectors;
- and security-compliance measures against firms enabling threats to Europe.
Implemented effectively, these conditions could alter the structure of the market so that transparency, diversification and competitive neutrality become the rational choices for firms seeking access to Europe. And because these conditions can be shared with other partners, their effect grows with scale: the more economies that apply them, the harder it is for Beijing to exert pressure on any one of them. Their deeper advantage is predictability. Rather than an endless cycle of case-by-case risk assessments and ad-hoc adjustments, the Six Nos set out in advance how Europe will apply its rules, letting firms invest for the long term with confidence, and denying any single company or government the chance to pick off measures one at a time. The aim is to make the conditions of access to Europe’s market clear, durable and difficult to waive under pressure.
The table below sets this out in operational form: an implementation matrix identifying, for each condition, the direction of Chinese policy, the existing European architecture, what the EU can deploy now and what it needs to build.
Swarm tactics
For each of these conditions, Europe should take several steps to build its architecture of rules and develop the instruments to back them up. But some of the most significant initiatives—the IAA, the CSA revisions—will take years to bite, and instruments still under consideration, from a resilience tool to a European version of US Section 301, are at least two years away. Getting these moving matters, but in the meantime the EU needs a “good enough for now” approach that uses as many existing tools as possible with speed, legal flexibility and directed focus.
One lesson of the EU’s EV tariffs on China was that a single high-profile target made it easy for China to concentrate its lobbying, so the EU spent a disproportionate amount of political capital compared with how little the measures achieved. An across-the-board tariff on China—even if it is clean, elegant and proportionate—would likely fail politically for the same reason. Instead, Europe has to exploit smallness and scale at once by using a swarm of distributed measures, with no single one decisive enough to be worth retaliating against, but enough in aggregate to achieve the effect required. This works like a military swarm, in which a single, high-value platform concentrates risk, but many smaller, expendable units spread it. It is far harder for Beijing to swat away 50 small, dispersed measures at once than one large and threatening one, and because there are so many, they can be dialled up, down or dropped without collapsing the whole.
This combines certainty and uncertainty, by design. The principles are fixed and announced: any firm knows the conditions of access and knows that breaching them carries consequences. But the specific measures—which instrument, applied where and when—are deliberately unpredictable. A state actor can optimise against a single known threat, but it cannot easily pre-position against many smaller ones whose sequence and targets it cannot read in advance. Europe should be predictable about its terms and unpredictable about its tactics; the first to give compliant firms confidence, the second to keep Beijing off-balance.
As the tables above show, a swarm of this kind can be built, now, from instruments that are already at the EU’s disposal. The purpose is to deploy them together, rather than one at a time, concentrated on the sectors that matter most and applied under the Six Nos, so that what can look like a scattered set of moves instead translates into the consistent application of clear principles. For example, safeguards on surging imports, a wider run of subsidy investigations, procurement instruments deployed across sectors, product-safety and security audits pursued systematically and national subsidy criteria recalibrated. None is decisive alone but deployed at once under a common rationale, they come from too many directions for Beijing to fend off. All the while, they are defensible as rules-based enforcement rather than a trade war by other means.
Right now, however, the European “swarm” is still a minor enough set of irritants that China can swat them away. The goal is to achieve cumulative effects that add up to a quantified sense of “enough”. Assessing what that means is harder with 50 small measures than 2 large ones, but ballpark figures are politically important. That is, the commission needs to be able to credibly tell member states that holding the line against Chinese coercion will keep key industrial sectors alive and close major vulnerabilities. The swarm should therefore be judged by results in a few critical areas: whether import surges slow, exposed firms survive long enough for alternative capacity to come online, single-country dependencies fall, price gaps narrow, and Beijing faces too many legally grounded measures to defeat through pressure on any one capital or company.
Making it a reality
Coalitions within Europe
Internal politics
Implementing these principles—whether by a swarm of measures now, or with new and improved architecture in the medium term—will require a stronger political consensus in Europe than there has been in recent years. Yet that consensus is now closer than ever.
Within the EU, the diagnosis is largely shared. France, once a dirigiste outlier, now leads a cluster of member states arguing that Europe cannot preserve market liberalism against a state-capitalist competitor of China’s scale without attaching conditions to access its market. Even states with liberal, open-trade instincts have moved this way, concluding that openness without reciprocity, transparency and security is no longer sustainable.
Even on climate politics, there is a growing recognition that a green transition built on unsafe products and monopolistic supply chains that Beijing can cut at will is not a secure transition, and that a decarbonisation that hollows out European industry will lose the domestic coalition that underpins it.
Some differences in exposure remain. European exporters with stakes in the Chinese market have greater fears of retaliation, while frontline states have greater concern about the wartime vulnerability of connected infrastructure. But the old maps of hawks and doves, a central European bloc versus western Europe, south versus north have faded. Among the supposed outliers, Hungary is likely less of a spoiler state after its election, while Spain courts Chinese investment but has not worked against the core direction of EU policy.
Germany remains the hinge. A few of its large firms with concentrated stakes in China have dominated the debate about acceptable risk, even as much of the rest of German industry is becoming more and more exposed to Chinese competition at home and abroad. The result is that constituencies once reflexively opposed to trade-defence measures have begun to move. Germany’s VDMA, the machinery and plant-engineering association, is traditionally one of the country’s most committed free-trade voices, whose export-oriented members long resisted anything that might provoke Chinese retaliation. Now, it argues openly that China is not competing fairly and that policymakers must respond, calling for tariffs, local-content rules and the enforcement of European standards on Chinese imports.
This leaves a shrinking number of firms whose commercial interests are no longer a proxy for the wider German economy, and which continue to resist the defence of the market that the rest of the economy depends on. They oppose limits on Chinese imports, including imports of their own China-made goods into Europe; oppose restrictions on insecure technologies and components they are building into their products and plants; and oppose any measures to address the supply-chain concentrations they rely on and have doubled down on.
In the medium term, the Six Nos would tilt the balance of incentives, making it harder for these firms to keep internalising the gains of their China exposure while externalising its costs—the dependency, the security risk, the displaced competition—onto the wider economy. Conditions that bite on imports from Chinese production bases, on insecure technology built into European systems and on concentrated sourcing would make them carry the risk they create rather than pass it on. In the short term, however, the choice falls on Berlin to decide whether the European economy is held hostage to a shrinking number of firms whose interests have become increasingly detached from it.
Underlying all these differences is a shared European interest. Even as the immediate costs of targeted Chinese retaliation fall unevenly, no member state can insulate itself from a major supply-chain rupture or a disorderly escalation with Beijing. That is the main political case for the swarm: many sub-threshold measures, applied under broad principles and backed by pre-agreed support, are easier to sustain than one large showdown in which every capital must decide whether it can bear the next act of retaliation. Among European countries, the coalition for maximal confrontation does not exist, but the political conditions for disciplined, cumulative action increasingly do.
Forging coalitions
Despite political positions now aligning more closely, full EU agreement and implementation will still take time the situation does not allow. To ensure the most impact as soon as possible, tighter clusters of like-minded countries should step in to bridge the gap. Smaller groups of willing states moving ahead of full consensus is increasingly accepted—and encouraged at senior levels—across EU policy on defence, competitiveness and economic security; the China agenda should be no exception.
A vanguard group could be ready to take faster collective action on China-related national-security risks, aligned with but ahead of the EU timetable. Frontline states that have weathered Russian hybrid operations and are at heightened risk of attack have strong grounds for addressing the dangers of technology exposure to Moscow’s strategic partner. They can do so through a framework of security requirements covering critical communications, energy, and port and logistics infrastructure, connected vehicles, and AI and data infrastructure. Most security-exposed states have already begun to move in this direction, though unevenly, and at a slower pace than their own threat assessments imply.
To align their responses an informal coalition, a Nordic-Baltic-Polish grouping for instance, should be agreed in close coordination with the EU, NATO, and key external partners that can cooperate on threat assessments. The heightened threat level gives these countries a strong incentive and justification for acting faster while the grouping provides more cover against retaliation than going it alone. It would also set a precedent for other European states and create pressure in the European Council to keep the EU timetable from lagging too far behind.
Another area in which small coalitions can have a big effect is national-level subsidies. The impact on Chinese EV sales from the French ecological bonus criteria, which incorporated carbon-footprint scoring across the supply chain, is a good example. Its introduction produced a dramatic collapse in Chinese firms’ share of the French market, as their coal-heavy supply chains and shipping distances pushed them above the carbon threshold. The three leading China-made models’ share of French EV sales fell from a peak of 32% to 4% in the space of a few months after the new eligibility rules took effect.
Subsidy rules could play a significant role elsewhere too, including in agricultural machinery, heat pumps, e-bikes and solar inverters. A few of the major member states with subsidy schemes in these areas, that were willing to use carbon, cyber-security or resilience criteria, would already span much of the European market. If a handful of major states—Germany, France, the Netherlands, Italy, and Poland—attached similar criteria to their subsidy schemes, this would cover most European demand. A producer would then face a clear choice to meet the standard or lose access to the subsidised market.
Coalitions beyond Europe
Europe’s China strategy can also achieve scale through closer coordination with external partners. Building supply chains independent of China requires a market large enough to support them. Below a certain threshold, alternative producers cannot reach viable scale and cost, and diversification stays permanently dependent on subsidies. No single market, the EU’s included, reliably clears that threshold alone, and only a handful of partners have markets large enough to matter. Aligning the EU with a few other major economies, primarily with the UK and some Asian countries, for example, would assemble combined demand on a scale that makes non-Chinese capacity commercially viable, and does so to the mutual advantage of each side’s firms. Coordination among a few large markets is worth far more than wider agreement among many small ones.
Europeans have invested heavily in the China coordination agenda with the US. But under the Trump administration, it is becoming increasingly clear this will achieve limited gains for the EU beyond moves that the US makes on its own, such as exclusions of Chinese companies in sectors where European firms compete. It is possible that this year’s EU-US agreement on critical raw materials (CRMs) could translate into more concerted action, and then be replicated in other areas such as legacy semiconductors, but even progress on an issue as urgent as CRMs has been far slower than necessary and US willingness to embark on larger-scale coordination to build transatlantic scale across a wider range of sectors has been limited, despite the implications that the hit to key industries in Europe such as chemicals and machine tools would have for its own supply chains.
Equally, while EU trade diversification efforts have accelerated, including a new set of major free-trade deals, this has not translated into a club-building effort on China policies as such. Rather, key partners’ decisions in areas such as consumer subsidies, tariffs and cyber rules are being made in isolation from each other. Achieving greater openness of new markets will have limited effect if European firms find themselves dealing with exactly the same Chinese economic practices in these markets too.
The UK is second only to the US as a market for European firms, but in some areas runs a weaker line on Chinese overcapacity and subsidies than the EU, to the detriment of the European companies displaced there. Already apparent in EVs, this gap is likely to widen in other sectors as EU efforts step up. Together, the EU and the UK could form a strong nucleus for a common approach, from security in connected sectors to building alternative non-Chinese supply chains where China currently dominates. Bespoke partnerships with Japan, Korea and India, going beyond the existing free-trade agreements, make sense too.
None of this would require identical policies, given the different tools and legal systems, nor would they require any public “countering China” rhetoric. But rough convergence on as many principles as possible—defensive trade and anti-subsidy measures, procurement and subsidy criteria, cyber rules in connected sectors, and joint supply-chain build-out—would have a significant impact.
The adequacy framework of the EU’s General Data Protection Regulation is a useful model for this, under which countries with compatible protections gain easier access to European data flows. Extended more broadly, partners meeting European standards on reciprocity, transparency, diversification and security would achieve deeper economic integration graduated to their degree of alignment: preferential access under the IAA and other support schemes, fast-tracked conformity and security clearances, eligibility for joint procurement and supply-chain partnerships, and priority in technology cooperation. The benefits would flow through to these countries’ firms, which would clear European market-access conditions as by default, while those that do not align would face case-by-case scrutiny.
Many of these conversations, with London, Tokyo, and others, are already under way. It is a reminder that the political process of building a framework to deal with China is not only about saying no to opacity, subsidy and coercion but yes to the partners and firms that meet its terms: transparency, fair competition and security.
An industrial policy calibrated to the threat
The defensive elements of the Six Nos framework mostly buy space. Several of them depend on Europe having something to switch to: “no monopolies” can exclude a dominant supplier only where an alternative exists, and “no backdoors” can bar an insecure vendor only where a trusted one can take its place. Where that capacity has disappeared, the framework manages dependence rather than moving beyond it.
Europe does not lack industrial-policy frameworks or competitiveness priority lists, from the Net Zero Industry Act and Critical Raw Materials Act (CRMA) to the Chips Act, the IAA, and the wider response to the Draghi report. But it lacks an allocation of funding driven by a clear reading of the Chinese challenge and where it is heading—which sectors Beijing is targeting next, where it is directing its industrial plans and subsidies, and where the next phase of competition will be decided. China is a rapidly moving target and Europe’s assessment needs to not just keep up but to be a step ahead.
The problem is that this reading does not currently exist in any one place. What the EU knows about Chinese industrial capability is scattered across the commission, national agencies, intelligence services and outside analysts, and rarely pulled together into a forward assessment that can drive decisions. Assembling one—pooling what member states and EU bodies know about where Chinese capability is concentrated, where subsidies and industrial plans are pointed, and how fast the frontier is moving—is the precondition for the rest. This should tell Europe which dependencies to price, which sectors to defend, where to build and where Beijing has already moved on. Without it, funding allocation risks defaulting to whoever lobbies hardest or to the crisis most recently in the headlines.
This reading should also determine how Europe builds: where defensive measures will suffice, where Europe’s lost capacity must be rebuilt, where viable positions need preventive defence, and where Europe needs to bolster its forward position. And finally, this should indicate what it spends. With resources scarce, concentration on the decisive sectors matters more than breadth.
Beyond industrial policy, Europe’s wider competitiveness agenda—the Draghi and Letta reports, the completion of the single market, the 2025 Competitiveness Compass roadmap—has been driven mostly by internal assessments of productivity gaps, fragmentation and scale, with China treated as one factor among many. The reading of where Chinese competition is heading should do more to set the priorities of that agenda, including where to merge into bigger and more competitive companies, which national barriers inside the single market should be removed most urgently, and where and when to direct investment. Pursued without that lens, the agenda risks spreading scarce effort too thinly and defending ground the contest has already moved past.
Facing up to China
For all this to work, European governments must finally be ready to stand up for themselves against Beijing—and ready to bear the consequences. Former commission president Jean-Claude Juncker once captured the politician’s dilemma: “we all know what to do, but we don’t know how to get re-elected once we have done it.” On China, the first half is largely true; European leaders broadly know what their policy requires. The difficulty is the second half: how to sustain public support when Beijing inflicts further harm in response.
Part of the problem is that Europe still pursues goals that are no longer credible. Leaders go into meetings with requests, demands and warnings they cannot plausibly believe will change Chinese behaviour. Exhorting Xi Jinping to rebalance the Chinese economy or reconsider his alignment with Russia was once a defensible statement of position; repeated without consequence, it has simply depleted European credibility. Beijing’s read is now that its relationship with Russia has cost it little in Europe, that Europe is not serious about defending its economy, and that it can slow and contain whatever measures are under way.
Europe also still pursues legacy goals from an earlier era—above all the pursuit of getting China to “open up”. Broad market access mattered when China was growing fast and access meant exports; with weak demand, eroding foreign market share, a narrowing European technology edge, and risks of leakage where it survives, the case for spending political capital on this has largely gone. Reviving the Comprehensive Agreement on Investment with China is not worth meaningful attention.
Europe’s best path is to treat China’s posture—the securitisation of its economy and its alignment with Russia—as locked in. As such, Europeans should understand bilateral engagements primarily as a means of buying the political space to make the adjustments Europe needs, including reducing dependencies that expose it to coercion, putting trade on a footing compatible with a thriving industrial base and addressing the vulnerabilities created by China’s backing for threats to European security. Persuading Beijing to change course is a lost cause. What Europeans should focus on now is preventing coercion while Europe changes the terms of the relationship.
This is not an argument for disengagement. If anything, a firmer European posture requires a higher intensity of bilateral exchanges, not least to manage frictions, explore negotiating avenues and prevent crises. Europe should therefore pair its new approach with investment in the machinery of managing the relationship: more regular and more candid official channels, crisis-communication mechanisms for when tensions are high and structured negotiation tracks on the issues where bargaining is possible.
A secondary goal is to widen that narrow negotiating space. Each EU instrument rests on its own legal basis, so it cannot easily be turned up, turned down or traded against one another; and because the measures currently in place barely counter the Chinese threat, giving any of them up in a negotiation is a major risk. The swarm answers both constraints. A package deliberately built with more measures than it strictly needs can afford to give ground in one area without falling short overall.
If China can replicate or exceed the effects of European measures through binding commitments of its own, or make lateral offers of greater value, the EU should be ready to act. It can do so by pulling back specific actions and reducing the intensity of enforcement in areas where China makes verifiable progress. The best outcome is to trade a withdrawal for Chinese concessions, and an acceptable one is to trade it for a reduction in Chinese retaliation while keeping the rest of the framework intact. At worst, Beijing could try to coerce Europe into abandoning the defence of its economy and security altogether. But even that would carry an advantage as coercion on that scale would unlock a different set of opportunities for Europe to act.
Never waste a crisis
The EU needs to be ready to move decisively when conditions allow. European policymakers tend to see Chinese coercion as a problem to be managed entirely defensively: avoiding the triggers, absorbing the consequences and finding off-ramps that restore the previous status quo. The opposite approach is required. Moments when Chinese behaviour creates the political conditions for a decisive European response need to be treated as opportunities the EU can capitalise on.
Beijing’s own approach is characterised by a “reactive assertiveness”, in which it waits for (or engineers) provocations, then responds with far more assertive measures than the trigger warranted. This way, it can frame the response as defensive reaction rather than initiated escalation. The Scarborough Shoal stand off in 2012, the 2010 Senkaku rare-earth restrictions, the 2020 Australian coordinated trade measures, the 2017 THAAD response against South Korea and the 2021–22 Lithuanian case, for example, all followed this pattern.
China has also used these moments to build new instruments of economic statecraft such as its export-control law framework, Unreliable Entity List, anti-foreign-sanctions law and blocking regulations. All of these emerged from or were developed in response to specific incidents but with a structural objective: each moment of confrontation produced lasting capacity rather than just a one-off effect.
While Europe should not seek to engineer crises of its own, it should be ready to adopt a version of strategic ratcheting using coercive episodes to deploy countermeasures and to consolidate instruments that would otherwise face political resistance. A coercive episode can do three things that ordinary conditions cannot. First, it opens a political window: measures that cautious member states and firms would block in normal times become passable when the cost of opposing them has just been demonstrated by Beijing. Second, it provides a legal trigger: an episode crossing the threshold for activating the ACI unlocks powers that are otherwise unavailable. And third, it provides justification: the first use of a contested instrument is always the hardest, but an instrument first deployed as a defensive response to documented coercion is normalised and faces far less resistance the second and third time.
Major episodes of Chinese pressure create the political permission and momentum to use or enact an instrument that is designed, ready and waiting. This is why the EU needs to be prepared. Such a window will open unpredictably and close quickly, so the EU will need measures drafted in advance. Each episode, handled this way, leaves behind something that has entered the permanent repertoire. This could be a tool, a precedent or an expectation it will be used again.
The ACI itself is the sharpest illustration of why this inverts the pressure. It is the most flexible tool Europe has: once activated, it places measures that currently sit on separate legal bases under a single one, which is what allows them to be scaled up, dialled back or traded off as a package rather than defended one by one. That is precisely the flexibility Europe otherwise lacks, and it is unlocked only by a Chinese coercive act serious enough to cross the threshold. The more forcefully Beijing coerces, the more completely it hands Europe the instrument that makes the entire strategy easier to run. Large-scale coercion is therefore not just a risk Europe must weather but a trap for China, as the response it provokes is more capable, more flexible and more durable than anything Europe could put in place without it.
The institutional preparation for this to happen requires pre-emptive work inside the commission: from pre-drafted countermeasure packages that can be deployed within days of ACI activation and quietly road-tested with member states, to pre-positioned coalition agreements with external partners on response to specific Chinese actions. It also needs communication strategies ready to go that frame the European response as the application of established principles.
Large-scale Chinese retaliation against any serious European action is far from a certainty. Beijing faces vulnerabilities that mean there are risks attached to a major economic confrontation with its most important market. For all its surface bullishness, China is experiencing fragile growth, weak domestic consumption, fiscal stress, high debt and a stagnant property market. It is still conceivable that more serious European moves could lead to bargaining rather than debilitating levels of coercion given the risk that large-scale coercion will blow back against China. It is one thing for Beijing to mount a full-scale response when facing 145% across-the-board tariffs, another when the EU is deploying a dispersed set of low-key measures, not one of which is a clear cause for large-scale retaliation.
But the package this paper proposes is designed to absorb the shock either way. It is distributed enough to be difficult to counter comprehensively; over-determined enough that some measures can be withdrawn in negotiation; embedded in coalitions broad enough to share the political costs; robust enough to be worth the fight; and defensible enough to European publics that it can command support. It should also be ready to go the minute Chinese coercion crosses the threshold.
The intended endpoint with China should be a stable settlement rather than a lasting struggle. Europe’s objectives are entirely consistent with a thriving Chinese economy, continued technological advances and leading firms in key industries. The measures proposed do not corner or contain Beijing, and there is no inherent reason why a negotiated equilibrium on different terms should be impossible. But this requires Europe to demonstrate credibility: that a new equilibrium is the best outcome that Beijing can achieve, because Europe is willing to defend its industry, its security and the viability of its model as if they are core interests.
Saying yes to no
The “no” Europe needs is not the one Beijing gave all those years ago. China’s “no” was the beginning of its path into self-reliance. Europe’s is the opposite: a no said to ensure it can keep its market open. European openness cannot survive if it extends to those who exploit it, taking access while denying their own, or use it to dominate the markets they enter. Drawing that line is the price for Europe of keeping its principles.
The decisions facing European policymakers are now different in kind from those of recent years. By now, policymakers widely recognise that China poses a systemic challenge to European economic power. Whether Europe can act on it, however, is less clear. The instruments exist or can readily be built, the principles are defensible and the coalitions can be assembled. So far, the EU has reached for these tools defensively, one sector at a time, often a step behind and never organised by a common principle. What has been missing is the resolve to use them together as a system and on Europe’s own terms.
This course will not be pain-free. It will raise prices in some sectors, expose exporters to retaliation and affect member states unevenly. But those costs are smaller and more bearable than the alternative: a slide into dependence that leaves Europe absorbing the same shocks from a weaker position, at a price it is already paying, with its choices narrowing and its model under threat. China decided it could say no. The question now is whether Europe can.
About the author
Andrew Small is the director of the Asia programme at the European Council on Foreign Relations. He is the author of “The Rupture”, also titled “No Limits”, about the transformation of European and American policy toward China, and was the first China fellow at IDEA, the advisory hub that reports to the European Commission president
Acknowledgments
The author would like to thank his colleagues on the Asia team for their excellent research support, Portia Kentish for her fantastic editorial support and Janka Oertel for all her invaluable inputs. The paper also drew from discussions at workshops held in Berlin and Brussels in February and May 2026, as well as exchanges with a wide range of European officials
[1] ECFR and Rhodium Group input paper “Pricing in the China downside risks – counting the costs of dependency, dominance, and limited de-risking”, June, 2026