EU rules on small packages and steel eye huge trade imbalance with China

BRUSSELS (AP) — The European Union rolled out two measures to protect its steel industry and limit e-commerce small parcels on Wednesday as the 27-nation bloc grapples with its staggering trade imbalance with China.

“Today’s change is about restoring fairness for European businesses and better protecting our consumers,” European Commission President Ursula von der Leyen said in an online post praising a new 3 euro ($3.42) customs duty on small packages. “The surge in low-value online imports has put our retailers at an unfair disadvantage. Too many of these products also fail to meet EU safety standards, putting consumers at risk.”

The Commission said new rules on steel imports are designed to protect EU plants and jobs from “the damaging impacts of global overcapacity” on “a strategically crucial European industry.” China’s subsidies for steel production have led critics in Brussels and beyond to charge that policy undercuts steel industries from Germany’s Ruhr valley to Kyushu Island in Japan.

The EU’s trade deficit with China widened in 2025 to around 360 billion euros ($410 billion) — or roughly 1 billion euros a day — and is rising in 2026.

China’s annual global trade surplus reached a near-record $1.2 trillion last year even after higher tariffs introduced by the Trump administration, and despite China’s dependency on Persian Gulf energy, the war in Iran has not destabilized China’s export-led economy with sales of high-tech goods and vehicles abroad having jumped.

Flood of small packages has destabilized main street

From Wednesday, the EU will remove an customs duty exemption called “de minimis” for parcels valued at under 150 euros. Chinese firms like the e-commerce giants Temu and Shien control about 90% of this type of trade, according to the Commission. The U.S. made a similar move last year.

The Commission said 5.9 billion small packages were imported into the EU in 2025, compared with about 1.4 billion in 2022. At roughly 16 million a day, that’s 97% of the traffic, but represents just 2% of import value. A majority of the packages were said to have failed safety tests and triggered environmental concerns on overuse of plastic.

“Europe finally shows teeth against flood of cheap package deals,” said Bernd Lange, the head of the European Parliament’s trade committee in a post online.

Yet the 3 euro tax might “not affect the big picture” as it’s minimal compared to the price gap between Europe and China for goods like e-commerce, according to Gary Ng, a research fellow at the Central European Institute of Asian Studies.

While it may be effective in reducing small orders and impulse purchases, Ng said that customers and e-commerce platforms can still make group orders.

EU steel under threat

The new rules set tariff-free quotas at 18.3 million metric tons annually and imposes an out-of-quota duty of 50% on 26 types of steel imports. It also requires more transparency from importers to trace where the so-called “melt and pour” stage of production takes place to ensure countries like China will not circumvent protections by shipping products to the EU via third countries. The EU had put in new steel tariffs in October to protect the bloc from a flood of steel imports diverted by new U.S. trade policy under Trump.

Europe’s steel industry is in crisis, with crude steel output falling to a “historic low” in 2026, according to the European Steel Association.

“Europe’s steel production is shrinking while imports as a share of the EU market are rising,” said the trade group’s director-general Axel Eggert in March. “EU policymakers must therefore agree the new steel trade measure quickly without it being weakened otherwise Europe risks losing more industrial capacity.”

While China producers more than half of the world’s steel, the EU imports mostly from trade partners like the U.K., Ukraine, India, Taiwan, Turkey, Japan and South Korea. The new tariffs could trigger penalties in free trade agreements with nations like Japan but some exemptions have been granted to Ukraine as it battles Russia.

“We will remain open to engage — call it a club, call it an alliance, call it whatever you like — but the idea that we come together with like-minded partners on this global challenge of overcapacity in the market,” said a Commission official tasked with communicating policy but not authorized to be named. “In an ideal world there is fair competition and level playing fields. Unfortunately, we don’t seem to live in an ideal world.”

Beijing will oppose the new rules even if they do not directly target China, said Alicia García-Herrero, a chief economist for Asia Pacific and Middle East at the French bank Natixis.

“The Chinese do not want this instrument to work. This could be a springboard for more,” she said. “It opens the door to the overall overcapacity instruments to see how it works.”

China’s Ministry of Commerce in May warned the EU against new steel import regulations and said China would firmly respond to “discriminatory measures” against its companies and products.

‘Wolf pack effect’

Some experts in China have raised the alarm over growing backlash to mass exports.

In a recent report, the Center for International Security and Strategy at Tsinghua University in Beijing identified “ China Shock 2.0 ” — a massive surge of highly subsidized, advanced Chinese manufacturing exports flooding global markets — as one of the top 10 perceived security risks for China. It warned that the EU would likely impose additional tariffs on China that, together with protectionist sentiment in the U.S., might inspire other nations to follow suit with “steep tariff hikes and investment screening” targeting Chinese firms.

“What makes this risk distinctive is that it does not originate from a single adversary. It is the ‘wolf pack effect’ of multiple countries acting in concert, inflicting not only direct economic losses on China but, more profoundly, degrading its strategic environment and international business reputation,” the report stated.

Beijing has hit back at the concept of “China Shock 2.0,” defending it instead as an “opportunity” which brings the world wider shared benefits from China’s tech innovations.

While the EU has not been as combative with China as the Trump administration, “the direction of travel is clearly shifting in Brussels,” HSBC economists Frederic Neumann and Justin Feng wrote in a research note on Tuesday.

In June, leaders from the Group of Seven nations issued a joint call to develop independent supply chains for critical minerals so crucial for defense and high-tech industries.

‘Status quo is not an option’

“China and the EU are partners, not rivals,” Guo Jiakun, a spokesperson for the Chinese Ministry of Foreign Affairs, said on Tuesday. “The root cause of the EU’s problems does not lie with China.”

China’s recent success handling Trump’s escalated tariff threats last year suggests it “can withstand external pressure,” according to Neumann and Feng, who said Beijing leveraged its control of rare earth supply chains to forge a truce on trade with Washington.

“If China managed a U.S. tariff ramp-up and the global energy shock during the U.S.-Iran conflict, it may show less inclination to make concessions to the EU,” the economists said. “The near-term outlook points to limited progress towards a comprehensive China-EU settlement.”

García-Herrero said that despite the importance of the EU’s common market to China — 90% of battery and 60% of its electrical vehicles exports go to the bloc — there is a perception in Beijing that they can successfully dissuade common action by lobbying national capitals in the EU.

“China thinks Europe has no leverage,” she said. “They do think they have the upper hand, by all means.”

China’s Minister of Commerce Wang Wentao met with the EU’s trade representative Maroš Šefčovič in Brussels on Monday.

“The EU remains open for business but we need to defend our industrial base and keep pushing for a level playing field globally, so our industries get a fair shot at competing,” Šefčovič said after the talks. “That is why today’s talks – and the ones to follow – matter.”

He has set an October deadline for meaningful results in rebalancing trade during a visit to Beijing.

“The status quo is not an option.”

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Chan reported from Hong Kong.