• France is leading efforts to activate the EU's anti-coercion instrument against China, putting the matter on the European Council agenda for October 23.
  • Germany remains cautious about deploying the powerful trade tool despite growing concerns about China's economic practices and the worsening EU-China trade imbalance.
  • The move represents a significant escalation in EU trade policy as the bloc grapples with Chinese overcapacity, market access restrictions, and control over critical minerals.

French President Emmanuel Macron is pushing the European Union to consider deploying its most powerful trade weapon—the anti-coercion instrument—against China, according to officials familiar with the matter. The initiative, backed by Poland, will be discussed at the European Council summit in Brussels on October 23.

The anti-coercion instrument, the EU's strongest trade countermeasure, would empower the bloc to restrict market access, investment, intellectual property rights, and public procurement for countries using economic pressure. While the tool has been available, internal divisions have prevented its deployment until now.

"France is advocating for all available response options to be considered," said one European diplomat, who requested anonymity because the discussions are private. "The perception is that previous measures haven't adequately addressed the structural challenges we face."

Germany's position remains more measured. Though prepared to discuss the trade tool, Berlin is cautious about activating it given potential economic fallout, particularly concerning given Germany's current economic challenges. A German official noted that while concerns about Chinese practices are legitimate, "we must weigh the consequences carefully."

The push comes amid worsening trade dynamics. EU imports from China continue to grow while European exports to China slump, creating what one trade analyst called "structural imbalances that can't be ignored." Industry stakeholders have raised alarms about Chinese overcapacity flooding markets with subsidized goods, restricted access for European firms in China, and Beijing's export restrictions on critical minerals essential for Europe's clean-tech and defense sectors.

China currently dominates the global rare-earths supply, controlling about 70% of production and 90% of processing. Recent deals between the US and Australia to reduce dependency have shifted the strategic calculus, but European manufacturers remain vulnerable to supply disruptions.

The EU's internal divisions were evident during recent tariff decisions on China-made electric vehicles, which split the bloc and highlighted the difficulty of forming a unified response. The anti-coercion instrument requires consensus among member states, making its activation politically challenging.

A Commission spokesperson declined to comment specifically on the upcoming discussions but noted that "all trade tools exist to protect European interests when necessary." Attempts to reach Chinese trade officials for comment were unsuccessful.

Correction: An earlier version of this article misstated the percentage of rare-earth processing controlled by China. The correct figure is 90%.