Are China and the European Union on the brink of a trade war? Last month, Brussels unveiled more details about the “Industrial Accelerator Act”, commonly known as “Made in Europe”, which aims to boost European manufacturing. China, it’s safe to say, is not keen on the initiative. This week, the Chinese Ministry of Commerce stated in response that “if the EU… presses ahead with the legislation, and thereby harms the interests of Chinese companies, China will have no choice but to take countermeasures to firmly safeguard the legitimate rights and interests of its enterprises.”

Beijing’s reaction is hardly surprising. The Made in Europe plan ironically borrows tools China itself used to upend European competition, such as market access in exchange for local production, joint ventures, and technology transfer. If successful, it would directly undercut the model through which Chinese firms have expanded in Europe.

Will the EU stand firm against these threats of retaliatory measures? The initial public reaction from EU leaders will likely consist of statements emphasising that China cannot dictate European policy. Behind closed doors, it will be a different story. To start with, Made in Europe is far from perfect and has already divided EU members. Germany is far from thrilled with French protectionist ambitions through EU funds. That makes Berlin the weakest link due to its automaker industry’s dependence on the Chinese market and supply chains.

Another country that might support China’s position is Spain. With Viktor Orbán out of the picture, Pedro Sánchez has been the loudest cheerleader for a pivot to Beijing in opposition to Donald Trump. While joint venture requirements in the Made in Europe plan align with his goal of attracting Chinese investment to Spain, the broader supply chain localisation demands go further than Beijing would accept. Sánchez could play a role in watering those requirements down.

Aware of the EU’s weaknesses, China will try to make it more costly for Brussels to implement the plan. Beijing will focus on watering down the strictest requirements of the Made in Europe initiative, splitting member states according to their exposure to Chinese investment and trade. The Chinese government will also mobilise European companies which depend on China to lobby against the plan. Beijing has plenty of tools to force Europe’s hand. The CCP can retaliate through targeted trade investigations on European companies operating in China, and implement market-access constraints or even explicit export controls on critical minerals and batteries. It might take some time for things to work out, but this is a similar playbook to that used by Beijing for tariffs on electric vehicles.

This growing spat between the two powers comes as China has grown more assertive yet anxious about a growing global backlash against its industrial dominance. This is what will make the Made in Europe threat sting far more, as China cannot afford to lose credibility. Beijing hasn’t hesitated in weaponising economic choke points such as rare earths or European microchip dependence, such as when the Dutch government tried to prevent Nexperia’s technology from being transferred to China.

For years, the EU talked about reducing dependence on China while still relying heavily on its manufacturing capacity. The Made in Europe plan, while imperfect, is an attempt to close that contradiction. But it will only work if Brussels accepts that industrial policy brings retaliation. Beijing’s immediate reaction shows the prevailing wisdom in many European capitals that turning to China to spite America is a dead end. Positive Sino-European relations can only be maintained as long as industrial goods are produced in China. There are nonetheless many in the EU who might be happy with that arrangement, and China’s pressure will test whether Europeans are serious about reindustrialisation.

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Miquel Vila is a political consultant specialising in international affairs. He is also the executive director of the Catalonia Global Institute.

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