EU set to launch trade ‘bazooka’ to combat Chinese imports

China’s economy has become more and more export-dependent in recent years as the ICIS chart shows:

• Since 2023, its exports have grown 30%, whilst its domestic demand has fallen 20%
• Its problem is that the population is seeing a major decline due to the lack of girls
• The One Child Policy since 1980 has encouraged families to have boy babies
• And even though the Policy ended in 2016, its Sex Ratio at Birth (SRB) is still wildly distorted

This means that domestic consumption is also set for major decline as the population declines.

EVERY 100 ADULTS TODAY WILL HAVE ONLY 12 GREAT-GRANDCHILDREN

The root cause of today’s trade crisis is China’s lack of babies.:

• China’s fertility rates have fallen well below the replacement level of 2.1 babies/woman
• Its fertility rate of 1.01 babies/woman is easily the lowest in the G10 countries
• Its current SRB of 109 boys: 100 girls is second only to India in the G10 countries
• Overall, China has “lost” 95m girl babies since 1980 by comparison with normal levels

These numbers mean, as the table shows from the McKinsey Global Institute:

• 47.8 of every 100 adults today are women
• These women will have only 23.4 girl babies
• These girls will have only 11.4 girl babies …
• So every 100 adults today will have just 11.6 great-grandchildren

The problem has been building for decades. But instead of trying to reverse the trend, Beijing has focused on export-led growth, financed by vast debt (now >3x GDP).

But as we noted last year, this policy can’t continue forever:

“2026 seems set to be the year that China tries to solve its ‘subprime on steroids’ crisis – in its property market, construction sector, and local government finances. But its fundamental problem – the lack of babies – seems as far from solution as ever.”

EUROPE IS SET TO START PROTECTING ITS KEY INDUSTRIES

The scale of the EU-China trade crisis has also been building for years as the Nikkei chart shows:

“The EU’s goods trade deficit with China reached €360bn ($410 billion) in 2025, equivalent to almost €1bn/day. Chinese imports are surging in sectors such as hybrid vehicles, batteries, solar equipment and chemicals, while EU exports of agrifood and wine are weakening.”

The problem from the EU side has been two-fold:

• China has pursued a ‘divide and rule’ policy to avoid collective action by all 27 EU countries
• For a long time, Germany resisted action for fear of losing its Chinese auto sales
• European consumers also resisted change as they liked China’s subsidised low prices
• But Germany has now lost its Chinese sales, and consumers are worried about job losses

As we reported here in February from the European Industrial Summit:

“European leaders rally to support crisis-hit chemicals industry”.

EUROPE PREPARES TO LAUNCH ITS NEW TRADE ‘BAZOOKA’

So today’s situation is changing, rapidly.

German automakers are having to close European plants due to increased Chinese imports.

And Europe is finally starting to push back, as the European Commission warned last month:

“Global trade can help to boost wealth and create jobs. However, sometimes countries resort to blackmail or trade restrictions to give their companies an unfair advantage, leading to trade conflicts with the EU.”

Critically, it seems Europe is about to make it more difficult for a few member countries to block trade sanctions:

France and Germany are finalising a plan to reform the EU’s Anti-Coercion Instrument (ACI), the “trade bazooka”:

• It would enable Brussels to apply a wide range of retaliatory measures, including tariffs, quotas, export controls and market exclusions
• At the moment, the “bazooka” needs a qualified majority of the bloc’s member states to be triggered
• The new proposal would instead mean Brussels could impose the “bazooka” unless a qualified majority of states blocked it
• The aim is to agree this at the next European Council meeting on October 15