For decades, the European Union positioned itself as the world’s most earnest champion of open markets and rules-based trade. Brussels lectured governments across the developing world about the virtues of liberalisation, the dangers of industrial subsidies, and the moral weight of World Trade Organisation commitments. That posture is becoming increasingly difficult to sustain. The EU’s recent wave of trade restrictions — directed largely, though not exclusively, at Chinese goods — raises uncomfortable questions not just for Beijing but for anyone who believed the multilateral trading system was more than a convenience for the already-powerful.
The measures themselves are sweeping in scope. In recent months, Brussels has doubled steel tariffs from 25 to 50 percent, formally imposed five-year countervailing duties on Chinese electric vehicles, and issued preliminary anti-dumping rulings on chemical products carrying duties exceeding 180 percent in certain cases. Alongside these conventional instruments, the EU has deployed its Foreign Subsidies Regulation with increasing aggression, launching investigations into Chinese firms across sectors ranging from security screening equipment to renewable energy. New legislative proposals — including the so-called Industrial Accelerator Act — would cap foreign ownership in strategic sectors at 49 percent and impose mandatory technology transfer requirements. The criteria are written in neutral language but structured in a way that applies almost exclusively to Chinese investors. One does not need to be sympathetic to Beijing to notice the widening gap between the EU’s stated principles and its current practice.
Industrial Anxiety Dressed as Security Policy
The intellectual justification for these measures oscillates between two registers: economic security and fair competition. Neither holds up cleanly under scrutiny. The security framing has become particularly elastic. Inverters from “high-risk countries” are now treated as threats to grid stability. Cybersecurity designations are being extended to cover supply chain decisions in healthcare, transportation, and energy. The concept of risk, stretched this far, can justify almost any exclusion, which is precisely what makes it so useful to trade policymakers and so corrosive to the credibility of the frameworks they claim to uphold.
The fair competition argument is more honest, at least in its underlying motivation. European manufacturers of electric vehicles, solar panels, and lithium batteries are struggling to keep pace with Chinese competitors on cost, technology, and scale. That is a real industrial challenge, and it would be unreasonable to expect European governments to simply absorb the consequences without a response. But there is a meaningful difference between a considered industrial strategy, investing in research, reskilling workers, building genuine supply chain resilience, and erecting barriers that insulate inefficient producers from competition while passing the costs on to European consumers and downstream industries. What Brussels is currently pursuing looks more like the latter than the former.
The Foreign Subsidies Regulation deserves particular attention because it represents something genuinely novel: an extraterritorial regulatory instrument that gives the European Commission authority to demand sensitive financial and corporate data from companies operating outside EU jurisdiction. China’s Ministry of Justice recently invoked its own legal countermeasures in response, describing the Commission’s investigation into one company as “improper extraterritorial jurisdiction.” Whatever one makes of that characterisation, the underlying dynamic, large economies asserting regulatory reach well beyond their own borders, sets precedents that will outlast this particular dispute. The norms established now, between major sophisticated economies, will define what is considered acceptable practice by a much wider range of governments in the years to come.
When “De-Risking” Becomes Something Else
The phrase “de-risking” entered European policy discourse as a deliberate softening of the harder “decoupling” language favoured in Washington. The idea was to draw a distinction between prudent diversification of critical supply chains and an ideologically driven effort to sever economic ties with China. It was, at the time, a reasonable distinction. Supply chains heavily concentrated in a single country do carry real vulnerabilities, as the pandemic years demonstrated plainly. Some degree of strategic diversification is sound policy.
But the gap between “de-risking” and active economic confrontation has narrowed considerably. The proposed mandatory diversification rules, requiring industries to source from at least three different countries, with no single supplier exceeding 30 to 40 percent of procurement, are dressed in the language of resilience but function in practice as a quota system designed to systematically displace Chinese suppliers. The expansion of the EU’s restrictive measures from new energy sectors into e-commerce, chemicals, and healthcare suggests a broadening ambition that goes well beyond insulating genuinely critical infrastructure from legitimate security concerns.
There is also a demonstration effect to consider. The United States and the United Kingdom have both drawn on aspects of the EU’s regulatory toolkit when refining their own trade frameworks. When major economies treat security-based trade restrictions as a routine instrument of commercial competition, they lower the bar for everyone. The architecture of managed trade being assembled in Brussels today will be cited as precedent long after the immediate political pressures that produced it have faded. That is a legacy worth thinking carefully about.
A Question of Costs and Credibility
None of this is to suggest that the EU has no legitimate grievances. State subsidies do distort markets. Significant overcapacity in key sectors does have real consequences for trading partners. These are genuine issues that deserve serious engagement — precisely through the multilateral institutions that have steadily atrophied, partly because powerful countries find it more convenient to act unilaterally when the existing rules do not deliver the outcomes they prefer.
The honest account of what is happening in Brussels is that Europe faces a painful and genuinely difficult economic adjustment. Its green industry transition is proving harder and costlier than anticipated. Domestic political pressures, inflation, sluggish growth, and anxious electorates are intense. In that context, trade barriers offer politicians a visible and emotionally satisfying response. The costs are diffuse, spread across consumers and downstream manufacturers. The benefits accrue to specific industries and constituencies. It is a familiar political economy, and Europe is hardly unique in succumbing to it.
What is perhaps distinctive to this moment is the scale of the gap between rhetoric and reality. The EU continues to speak the language of open markets, multilateral rules, and level playing fields while simultaneously constructing an increasingly elaborate architecture of managed trade. That contradiction matters for Europe’s own credibility as a rule-setter and norm-builder on the global stage. It matters for the businesses — European and otherwise, that have organised their investments around the assumption that access to the single market is governed by transparent, consistently applied rules rather than shifting political calculations.
The wall being built in Brussels may keep some things out. But walls have a habit of shaping the space inside them as well. European consumers, climate goals that depend on affordable clean energy components, and the manufacturers downstream who rely on competitively priced inputs will all feel the effects. The more important question is whether Europe can find a way to address its legitimate industrial anxieties without abandoning the principles it has long asked others to uphold. At this particular moment, the answer remains genuinely unclear, and that uncertainty itself is worth taking seriously.
Mr. Qaiser Nawab, a global peace activist, is a distinguished international expert specializing in the Belt and Road Initiative (BRI), Afghanistan, Central Asia and founder of the Belt and Road Initiative for Sustainable Development (BRISD), a newly established global think-tank headquartered in Islamabad, in conjunction with the one-decade celebration of BRI.
