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The European Union shouldn’t shy away from a trade war with China if it wants to avoid deindustrialisation, according to a report published Monday by the bloc’s foreign-policy think tank, the European Union Institute for Security Studies.
The report argues that confrontation with Beijing is likely unavoidable and urges Brussels to make it easier to deploy its most powerful trade-defence weapon, the Anti-Coercion Instrument (ACI).
The analysis lands after year in which China continued to weaponise Europe’s dependence on rare earths and chips through export controls, while its trade surplus with the bloc ballooned to €359.3 billion.
“The EU should adopt an ‘escalate to de-escalate’ approach similar to those used by the US and China. It must be capable of deploying its strongest tool – the Anti-Coercion Instrument – to defend core interests,” the report says.
According to the authors, the EU should not fear retaliation from Beijing, arguing the cost would still be lower than doing nothing.
“After all, a temporary trade war with China would be painful, but worth it if it helped prevent the EU’s deindustrialisation. The EU and its Member States should communicate this reality clearly to their citizens.”
Reforming the trade bazooka
While the ACI is a powerful weapon against economic coercion, the EU held back from using it in 2025.
Often referred to as the bloc’s “trade bazooka”, the tool allows Brussels to impose measures such as export controls, restrictions on licences and intellectual property rights, or limits on access to public procurement when a non-EU country applies economic pressure.
But the process of activating it is slow and politically fragile, and can be easily blocked by member states.
The report calls for reforms that would allow the European Commission to provisionally apply the tool during the mandatory four-month investigation phase. It also suggests reversing the current voting system so that a qualified majority would be required to block the ACI’s use, rather than to approve it.
Playing to China’s weaknesses
The report stands out for its unusually combative tone, presenting tougher trade tactics as inevitable in response to Beijing’s nationalist economic strategy.
It highlights China’s vulnerabilities: weak domestic demand, dependence on the EU market and reliance on European technology and research.
Brussels should exploit those weak spots by maintaining and creating “technological chokepoints,” alongside “targeted industrial policy, combined with export controls and outbound investment screening,” the report says.
The authors also call for the diversification of supply chains and export markets.
Combined with “credible escalation control” based on the Anti-Coercion Instrument, the EU could then pursue what the report calls “leverage-based diplomacy” with Beijing.
“Having built up its negotiating position, the EU could then recalibrate its diplomacy with Beijing and move beyond treating diplomacy as an end in itself,” it reads.
“The EU should set realistic but meaningful demands that reflect core interests, paired with unilateral measures if no agreement is reached.”