What to expect for China trade defence, competitiveness & the next EU budget

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What to expect for China trade defence, competitiveness & the next EU budget

Deutsche Bank

Research

Europe Economics Date

17 June 2026

Europe Blog

What to expect for China trade defence,

competitiveness & the next EU budget

Marion Muehlberger

n At the upcoming EU Council on Thursday and Friday, EU leaders will debate

Senior Economist

how to address the second China shock hitting the EU manufacturing

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industry, how much of the next EUR 1.8 tr EU budget to spend on agriculture

vs. defence/competitiveness, and how much progress the EU has made Ursula Walther

with its competitiveness push since the EU Commission published its "One Research Associate

Europe, One Market" roadmap on April 24.

n China trade defences – no quick relief for the EU manufacturing sector.

Most tangible outcomes will center around developing new trade defence

tools to counter the second China shock. EU leaders are likely to give the EU

Commission a mandate to move forward with expanding its toolbox (more

likely with a diversification and less likely an overcapacity tool). However,

developing any of these tools is likely to take at least one year. Concrete

trade defence measures, like safeguards on the chemical and machinery

sector, are unlikely to be agreed on any time soon. Thus, no quick relief for

the EU manufacturing sector is to be expected.

n Next EU budget – spend better still holds, no joint borrowing. The draft

7-year budget allocates EUR 362 bn to competitiveness and defence,

significantly increasing its share of the budget from 14% to 23%. While the

overall envelope might still be negotiated further down, we expect a

compromise to be found by the end of the year so that negotiations can be

concluded before the French presidential elections in April 2027. Unlike in