The European Union will use all available tools to rebalance what European Commission President Ursula von der Leyen called an unsustainable trade relationship with China. She said the bloc’s goods deficit reached €1 billion ($1.15 billion) a day last year and warned that Europe was experiencing a second China shock through deindustrialisation. Germany is backing tougher EU action after Chancellor Friedrich Merz cited Chinese subsidies, industrial overcapacity, aggressive pricing and an undervalued currency. Germany’s bilateral deficit reached €90 billion in 2025, while Berlin is drafting tariffs, mandatory joint ventures, stronger investment screening and tighter export controls. EU Trade Commissioner Maros Sefcovic is seeking tangible results from talks by October. Von der Leyen also said the EU must reduce its dependence on China for critical minerals, especially rare earths, and plans to establish a European Corporation on critical raw materials to procure and stockpile supplies.