Berlin and Paris want to give the European Commission an instrument that, in an emergency, could go as far as immediate exclusion from the single market. The economist Sander Tordoir speaks of a historic turning point. Yet the emergency switch is so far a proposal, not a decision. It responds only to coercion, and it protects the single market, not the position of European companies in third markets. Whether deterrence holds depends, provisionally, on one question: does Beijing believe that Europe is prepared to bear the costs?

Big Words

„We are experiencing a Zeitenwende in Germany’s China policy“ – this is how Sander Tordoir opens an interview that WirtschaftsWoche published on 8 October. Tordoir is an economist who, together with the US economist Brad Setser, wrote a paper on German complacency in dealing with China. He sees Chancellor Merz on the toughest China course the EU has ever taken and places him close to the history books.

Those are big words. They refer to a letter from Merz and Macron to the Commission and to an accompanying document. Nothing has been decided: the European Council is due to meet next week, there is no legal basis, and the author of this piece does not have the wording of the papers. What follows relies on press reports that quote from them.

What Is Being Proposed

According to these reports, the Commission is to receive an instrument that allows a decisive response at the systemic level, up to and including immediate exclusion from the single market where necessary. The Commission would trigger it unless a qualified majority of member states votes against. That reverses the usual procedure: it is not approval but objection that needs the majority.

The trigger is remarkable. The instrument is meant to apply when a trading partner deliberately undermines fair market conditions and distorts the EU market in a targeted way. A German official described it as a „second-strike weapon“, to be used only in response to coercive measures such as massive, sudden or arbitrary tariffs or export bans. The letter does not name China; in the German reading, the instrument could also be directed against the US. Tordoir calls this a Voldemort strategy: the paper does not say the name but clearly means Beijing.

That makes the instrument less a tool against dumping and overcapacity than a response to blackmail. Tordoir’s escalation scenario makes this clear: the EU imposes protective measures on Chinese plug-in hybrids, Beijing responds with a supply stop on rare earths, and only then would Brussels pull the emergency switch. The purpose is deterrence, not escalation. According to the reports, some officials already consider the threshold for use too high.

The Levers

Tordoir cites several levers. The first is market access. The EU runs a trade deficit with China of about one billion euros per day, roughly 360 billion a year. China’s domestic demand is weak, domestic car sales have collapsed by 20 percent according to Tordoir, and Europe is the largest and most lucrative market outside China for Chinese manufacturers. The weaker the home market, the greater the dependence on exports.

Set against this is a dependence in the opposite direction, which Tordoir’s interviewer herself raises: the EU sources almost 100 percent of its heavy rare earths, 93 percent of its solar panels and 73 percent of its antibiotics from China. A complete market exclusion would also hit goods that Europe cannot easily do without. How targeted the exclusion is meant to be, the reports leave open. Provisionally, it remains a question of design whether market access can work as a lever without endangering Europe’s own supply.

As further levers, Tordoir names Chinese aviation, which he says depends on European components, semi-finished goods and engines, and the semiconductor industry, which depends on technology from Germany and the Netherlands; he names Trumpf, Zeiss and ASML.

The semiconductor chain in particular shows how unevenly the levers are distributed. ASML is the system integrator of EUV lithography; Trumpf (laser source) and Zeiss (optics) are suppliers in this chain. Decision-making power thus lies with a single Dutch company, and it sells hardly anything in Europe. Its sales depend on markets outside the EU. Exclusion from the single market changes nothing about ASML’s business with its customers; it does not hit the lever. At most, export control applies here, and by common account that lies with the Dutch government, under strong US influence, not with Berlin and Brussels. A supply stop would hit ASML first, then the Chinese buyers.

Then there is the factor of time. Levers of this kind lose value the longer they are threatened, because the target has time to build substitutes. This is a provisional assumption, but it fits China’s policy of substitution in semiconductors.

What the Emergency Switch Does Not Touch

An earlier piece on this blog, in January 2026, asked why European tariffs miss their target. Three reasons were given: localization, product differentiation and territorial limitation. All three can be tested against the new initiative.

Localization. Chinese manufacturers increasingly assemble in Europe, for example in Spain or Hungary, and thereby avoid the punitive tariffs while most of the value added still comes from China. Whether an „exclusion from the single market“ would also capture such vehicles is not clear from the reports. Whether the instrument hits circumvention at all depends on it.

Product differentiation. In January it was described as foreseeable that Chinese manufacturers would shift to plug-in hybrids, which are subject to the lower basic tariff. Today these are exactly the vehicles at the centre of the conflict, which Tordoir plays through as the next escalation step.

Territorial limitation. Like the tariffs, the emergency switch applies to the EU single market. Brazil, Thailand, South Africa – the markets where the future of the German car industry is decided – do not appear in the interview. Tordoir’s supplementary proposals also lie on the single-market side: safeguards, that is, import quotas that can be put in place faster than anti-dumping proceedings; a fund financed from tariff revenue for states that Chinese retaliation could hit especially hard; and Mario Draghi’s agenda for deepening the single market. Instruments that strengthen European companies in third markets are missing.

What has changed since January is the situation within the EU. Berlin, then wavering between export interests and the need for protection, is now driving the initiative together with Paris. Hungary, named in January as a courter of Chinese investment, is likely, in Tordoir’s assessment, to go along after the change of power to Péter Magyar. Spain, by contrast, seeks closeness to Beijing. A united European line that would make deterrence credible is therefore not yet visible.

Self-Made Dependencies

Who sits at the longer lever depends on how long the dependencies last. A piece on this blog from 4 October on dependence on generic drugs places pharmaceutical supply in a series with solar, EVs, batteries and semiconductors. The pattern, at least in the dependencies on China: the dependence arises not only from foreign industrial policy but also from one’s own purchasing logic. With generics, rebate contracts, reference prices and statutory discounts open the market to the cheapest supplier; with solar modules, it was price. Tordoir’s figure of 73 percent for antibiotics also lies in this field, since antibiotics are to a large extent generics.

Such a dependence cannot be ended by decree. It would have to be paid for with higher prices and built up over years. Peter DeYoung, head of Piramal Global Pharma, tells the New York Times that a plant that takes four years to commission in the US or Europe can be completed in India in one. And according to the manufacturers‘ association Pro Generika, the German drug-shortage law of 2023 has so far not led to any expansion of production of antibiotics or cancer drugs. The association represents interests, and others assess the law’s effect differently. As an indication of how slowly the dependence is shrinking, the direction is nonetheless telling.

Provisionally, this yields a gradient to Europe’s disadvantage for as long as these dependencies persist. China’s lever lies with a few goods that can hardly be replaced in the short term and whose absence hits citizens directly. Europe’s lever, market access, is spread across many sectors and works with a delay. In addition there is a fallback option: Chinese manufacturers are gaining share in third markets such as Brazil, Thailand and South Africa, and could at least partly absorb the loss of the EU market there. This closes the circle with the January piece: the same third markets that Europe’s tariffs do not reach also relativize the lever of market exclusion.

Semiconductors are different. For logic chips, the core of Europe’s dependence, the counterparties are not in China but in Taiwan, where the most advanced chips are made, and in the US, where a large share of designs and design tools sit. Huawei does develop chips, but is unlikely to play a significant role in Europe’s supply of logic chips. The dependence therefore gives Beijing no direct lever. It provisionally weakens Europe’s position vis-à-vis Washington. That matters for the emergency switch, because in the German reading it could also be aimed at the US if the trade war flares up again. Against Washington, this lever could hardly be used as credibly as against Beijing.

For simple standard chips, by contrast, the China lever exists, and the Nexperia case demonstrated it last year. Nexperia is the former standard-products unit of the Dutch chip group NXP. NXP sold it in 2017 to an investor consortium; in 2019 the Chinese, partly state-owned group Wingtech took control, and the authorities approved this at the time. Nexperia makes wafers in Hamburg and Britain, which go to China for packaging. The finished chips are found, among other places, in lighting, braking systems and driver assistance. After the US put Wingtech on its sanctions list, the Netherlands took control of Nexperia at the end of September 2025 to prevent a drain of technology to China. Beijing responded with an export stop on the chips made in China, and the German car industry came under pressure. After initial easing, China demanded that the Netherlands withdraw its control measures, and The Hague obliged and gave up control again. Since then, the EU has been planning to require carmakers to source chips from several suppliers.

As a single case, this is not yet proof. As evidence for the thesis, it is provisionally useful for three reasons. It is the most precise test so far of Tordoir’s escalation ladder: a member state intervenes, Beijing responds with a supply stop at a chokepoint, and the European actor backs down. It shows how the dependence came about, namely through a sale and an approval and through a production chain whose last step lies in China, not through Chinese coercion. And it was embedded in the US–China conflict, since the trigger was the US sanctions list.

A counterweight remains, and Tordoir names it: the weaker China’s domestic demand, the more dependent it becomes on exports, and the gap could narrow over time. But the emergency switch works on deterrence, not on reducing dependencies. At best it can buy time; it cannot replace it.

Zeitenwende or Course-Setting?

The core of Tordoir’s statement, that something has shifted in Berlin, holds up. Two years ago the federal government still rejected the EV tariffs; today it backs a proposal that could extend to market exclusion. Whether this is a Zeitenwende remains provisionally open. Three findings speak against it.

First, the instrument is so far a proposal, and even its supporters in part consider the threshold for use too high. Second, its purpose is deterrence: a course whose point is not to be applied can hardly be called the toughest the EU has ever taken. Third, two of the three levers cited, aviation and semiconductors, do not lie with the single market, and the third, market access, is relativized by Europe’s own dependencies, for example in rare earths.

The thesis that provisionally follows: the emergency switch can change the single-market problem, it leaves the third-market problem untouched, and its deterrence hinges on whether Beijing believes that Europe will bear the costs. As long as the dependencies in rare earths, solar, pharmaceuticals and standard chips persist, Europe provisionally sits at the shorter lever. The thesis could be refuted if the Council adopts the instrument and it turns out to also capture vehicles assembled in Europe, and if a united majority of member states stands behind it. In third markets the EU has no rights of intervention of its own. It can act there only through agreements, financing and partnerships, and only with the consent of the partner countries. That it will mobilize such means to a sufficient degree in the foreseeable future is provisionally not apparent. Until then, the Zeitenwende is a claim awaiting its test.

Ralf Keuper

Sources

• Álvarez, Sonja: „Wir erleben eine Zeitenwende in Deutschlands China-Politik“ (interview with Sander Tordoir), WirtschaftsWoche, 8 October 2026 (in German).
• Deutschland und Frankreich wollen mit EU-weit Chinas Billigimporte stoppen (finanzen.ch, in German)
• EU-China-Handelsgespräche: Oktober-Frist, Defizit von 1 Mrd. € pro Tag, Sefcovic in Peking (IndexBox, in German)
• Deutschland und Frankreich treiben EU-Abwehrinstrument gegen chinesische Billigimporte (it-boltwise, in German)
• Der zweite China-Schock: Warum europäische Zölle ins Leere greifen (EconLittera, 6 January 2026, in German)
• Why Nexperia is at the centre of an autos chip crisis (Reuters via MarketScreener)
• China lifts ban on Nexperia chip exports (Just Auto via Yahoo Finance)
• Nexperia-Krise: Niederlande geben Kontrolle über Chiphersteller ab (Automobil Produktion, in German)
• EU will Autohersteller zu weniger China-Abhängigkeit bei Chips zwingen (Euronews, 21 May 2026, in German)
• Generika-Abhängigkeit, Rabattverträge und die deutsche Variante eines bekannten Musters (EconLittera, 4 October 2026, in German)