EU Trade Chief to CEOs: How Much Can You Afford to Decouple from China?
The European Commission plans to weaken China’s hold on European supply chains and is seeking input from industry leaders before proposing formal rules. Trade commissioner Maroš Šefčovič will meet with chief executives from sectors including machinery, electrical components, automotive, and chemicals on September 18th.
This instrument, known as the diversification tool, would require companies to source critical imports from at least three suppliers where alternatives are available. While previously proposed in June, the Commission is now consulting industry before drafting the proposal, acknowledging the cost implications.
Šefčovič emphasizes that "the cost of diversification is smaller than the cost of disruption," and aims to secure buy-in from European companies. The meeting’s timing is crucial, as Ursula von der Leyen delivers her State of the Union address on September 16th, expected to highlight China’s threat to Europe’s industrial base.
The Commission plans further discussions with China, including a videoconference between Šefčovič and Wang Wentao mid-September and a potential trip to Beijing in early October. National leaders will meet mid-October, and the Commission is prepared to propose harsher measures if negotiations yield no results, with potential consequences for Chinese industrial overcapacity.
The EU’s significant trade deficit with China—approximately €1 billion per day—underlies the urgency of rebalancing supply chains.