France and Germany ask Brussels for a fast «systemic reaction» tool against China-driven market distortions

Serguey Asael Shinder06 October 2026, 09:222 min read

France and Germany sent a letter to European Commission President Ursula von der Leyen on Monday 5 October, with a policy paper on global economic imbalances, proposing new EU powers to counter market distortions, Euronews reports. The letter is signed by President Emmanuel Macron and Chancellor Friedrich Merz.

The background. The Commission describes the EU's economic relationship with China as unsustainable, with the bloc's trade deficit estimated at about €1 billion a day in 2025, and has given China until this month to offer concessions. The accompanying paper warns of "a massive industrial shock" in sectors central to Europe's economy, including pharmaceuticals, aerospace, cars, industrial machinery and chemicals. The issue goes to EU leaders at the European Council summit next week.

The proposed instrument. It would be activated "where third countries seek to undermine the restoration of a level playing field and fair market conditions by political or economic means, leading to severe and systematic distortions", and would restrict access to the single market, which Paris and Berlin see as the EU's main leverage. Two design choices stand out:

• decisions would go through comitology, the procedure in which member-state representatives scrutinise Commission measures, and the tool would apply "unless a qualified majority is opposed", making it easier for the Commission to act;
• it should be "country agnostic" and capture all distortions "from subsidies to currency manipulation".

An Élysée source told Euronews the aim is to be able to impose tariffs and other measures; the existing Anti-Coercion Instrument, which can restrict access to licences and intellectual property, is cited as a model.

Other requests. A diversification instrument to reduce dependencies and supply concentration, an inventory of possible Chinese retaliation and its impact on each member state, more trade-defence investigations launched on the Commission's own initiative, and changes to anti-dumping, anti-subsidy and safeguard rules to make circumvention harder.

The inclusion of currency manipulation among the distortions is the part most relevant to foreign-exchange markets, since it would let exchange-rate practices feed directly into EU trade measures.