Europe needs new trade tools – and the will to use the ones it has

At the European Council of 15-16 October 2026, EU leaders asked the Commission to make effective use of existing trade instruments and to urgently complement them with new ones to address global macroeconomic imbalances (European Council conclusions). The request reflects a remarkable political convergence. In early October, France and Germany presented a joint initiative calling for a more assertive response to distortive trade practices — a notable shift for Berlin, long reluctant to embrace such measures. The Commission is expected to present a package before the end of the year.

The new consensus will be judged less by how many instruments the EU creates than by whether it is willing to use them. New tools are justified when they close genuine gaps in the existing framework, particularly regarding strategic dependencies (for instance, in active pharmaceutical ingredients or mature-node semiconductors) and systemic distortions (such as state-driven industrial overcapacities). But when economic confrontations escalate into coercion, Europe already has a powerful instrument: the Anti-Coercion Instrument (ACI). The real question is whether member states can agree to deploy it.

The agreement reached with Beijing on 9 October to cap imports of Chinese hybrid cars shows what dialogue can deliver when backed by credible leverage. Yet, it leaves key structural imbalances — most notably China’s growing trade surplus with the EU and overcapacity in sectors such as chemicals and machinery — untouched, and new instruments may not be operational until well into 2027. In the meantime, the political consensus must be translated into action with tools that are already available.

Closing genuine gaps

EU trade defence, which consists mostly of anti-dumping and anti-subsidy duties, was designed to remedy specific forms of unfair competition. It was never meant to address the security risks that arise when Europe depends excessively on a single country for critical products such as generic medicines or solar components, even in the absence of import dumping or subsidies. Safeguards, which take the form of temporary restrictions in response to sudden import surges, only partly fill the gap; they must, in principle, apply to imports from all countries and cannot last more than eight years. The expiry of the EU’s steel safeguard on 30 June 2026, after eight years of application, illustrated this shortcoming.

The diversification instrument that the Commission is preparing could change sourcing incentives and encourage alternative suppliers, both within and outside Europe. It could also be more targeted than is commonly assumed. The EU’s detailed customs nomenclature allows measures to be calibrated to very specific products. Combined with objective criteria on import concentration and security risks, a formally country-neutral instrument could, in practice, target precisely the dependencies that leave Europe vulnerable without penalising alternative suppliers.

A second new tool also deserves consideration: namely, a European instrument inspired by Section 301 of the US Trade Act, which allows Washington to investigate and respond to foreign practices it considers unfair. The measure’s appeal lies less in tariffs than in a structured investigative process. State-driven currency distortions and the cumulative effects of industrial overcapacity are practices that existing EU instruments struggle to address. The EU’s Trade Barriers Regulation is not an adequate substitute, as it only applies when international trade rules are breached, and not every harmful practice, particularly in non-market economies such as China, constitutes a breach. Transparent criteria, industry complaints, and Commission-initiated investigations could expose systemic distortions and create negotiating leverage even before countermeasures are imposed. Creating thresholds that are more precise than the open-ended US notion of ‘unreasonable’ practices would help to avoid the unpredictability of the American model, as illustrated by the recent Section 301 investigation into Germany’s pharmaceutical pricing.

What about WTO law? Compatibility with WTO rules should not become a proxy for political reluctance. But an openly WTO-inconsistent instrument would consume considerable political capital before it could even be used, given how deeply the commitment to rules-based trade is embedded in EU institutions and member states. The better option is a legally sophisticated design that the EU can credibly defend, accepting a degree of strategic ambiguity rather than constraining itself unnecessarily or openly disregarding the rules.

No need to reinvent the emergency button

The Franco-German proposal also pursues a second objective: enabling rapid and far-reaching retaliation in escalating confrontations, up to an immediate cut-off from the single market. Dubbed a ‘kill switch,’ this option is reportedly part of the Commission’s forthcoming package. Here, the case for a new instrument is much weaker.

When trade confrontations escalate that far, they usually involve economic coercion, and the EU already has the Anti-Coercion Instrument (ACI), adopted in 2023, at its disposal. This tool allows the EU to respond when third countries use trade or investment measures to pressure the Union or a member state into a particular policy choice. Its possible responses go well beyond tariffs, encompassing restrictions on imports, exports, services and investment; exclusion from public procurement; and measures affecting intellectual property and financial services. Combined, these options are capable of shutting foreign operators out of large parts of the single market. Nor is the ACI necessarily slow: its procedural timelines are indicative, so with sufficient political will, the EU could move considerably faster.

The ACI has limits. Not every structural distortion amounts to coercion, which is precisely why a separate instrument for distortions makes sense. But in true cases of coercion, the question is less whether Europe has sufficiently powerful measures than whether it is prepared to act.

The real constraint is political

Paris and Berlin propose reverse qualified majority voting, under which Commission measures would go ahead unless a qualified majority of member states opposes them. This could be the proposal’s most consequential institutional innovation. Under the ACI, by contrast, the Council must first confirm the existence of coercion by a positive qualified majority.

Yet, this raises a question about the depth of the new consensus. If France and Germany genuinely agree on more assertive action, assembling a majority under the ACI should become a far more realistic option. If such a consensus remains elusive, the problem lies less in the contents of the legal toolbox than in persistent disagreement over when to use them.

That disagreement has a material basis, as member states face very different risks of retaliation. The Franco-German initiative proposes mapping these costs, but identifying costs is not the same as agreeing how to share them. The solidarity mechanism that the Commission is preparing in order to cushion the uneven costs of third-country retaliation points in the right direction; its scope and funding will determine whether it can reassure the most exposed member states. Without credible burden-sharing, negotiating another instrument risks merely postponing the choices that already constrain EU action.

The more pressing task is therefore to make the ACI a credible EU instrument against coercion. This can be accomplished through a revision that shortens its procedural deadlines and adds an accelerated procedure for the most urgent cases, possibly allowing temporary countermeasures where severe harm is imminent. Meanwhile, new instruments should address dependencies and systemic distortions.

Europe’s emerging economic security consensus will not be tested by how many tools it creates, but by whether it is prepared to use them, including those it already has at its disposal. New legal powers can strengthen the Union’s capacity to act. They cannot, however, substitute for the political will to do so.

Tags: Trade, EU, European policies