More than two centuries ago, Franco-Swiss Enlightenment writer Madame de Staël lamented that the German states had neglected “the great national power that had to be forged amid Europe’s colossi.” She was writing about how the politically fragmented German states had failed to combine their economic strength into a national power capable of challenging Napoleon Bonaparte. But the remark could easily apply to all of Europe today. The continent is neither small nor poor, but it has often struggled to translate its economic might into political leverage.
The joint French-German letter and nonpaper sent to European Commission President Ursula von der Leyen in early October is one encouraging sign that this may be changing. French President Emmanuel Macron and German Chancellor Friedrich Merz want the European Union to act much faster against persistent market distortions. In service of this goal, they are proposing a new mechanism that could ultimately restrict access to the European single market. Under their proposal, economic measures put forward by the commission could take effect unless a qualified majority of governments opposed them.
More than two centuries ago, Franco-Swiss Enlightenment writer Madame de Staël lamented that the German states had neglected “the great national power that had to be forged amid Europe’s colossi.” She was writing about how the politically fragmented German states had failed to combine their economic strength into a national power capable of challenging Napoleon Bonaparte. But the remark could easily apply to all of Europe today. The continent is neither small nor poor, but it has often struggled to translate its economic might into political leverage.
The joint French-German letter and nonpaper sent to European Commission President Ursula von der Leyen in early October is one encouraging sign that this may be changing. French President Emmanuel Macron and German Chancellor Friedrich Merz want the European Union to act much faster against persistent market distortions. In service of this goal, they are proposing a new mechanism that could ultimately restrict access to the European single market. Under their proposal, economic measures put forward by the commission could take effect unless a qualified majority of governments opposed them.
The French-German letter doesn’t name the source of the market distortions that these measures are intended to check. But the unspoken target is obvious: China.
For much of the past two decades, France and Germany approached China from significantly different economic positions. Paris was concerned about a lack of reciprocity, threats to industrial sovereignty, and the risks created by strategic dependencies. German Chancellor Angela Merkel’s China policy was shaped by that firm belief that expanding economic relationships with Beijing remained, on balance, favorable to the German economy. As a result, China became a major source of growth for the German industry—especially cars, machinery, and chemicals—while German companies helped develop the Chinese industrial infrastructure by investing heavily in local production.
But Berlin might have wanted to be more cautious, as the geoeconomic dynamics of the past decade have made its calculations much harder to sustain. German exports to China fell by 9.7 percent in 2025, while imports rose by 8.8 percent. The bilateral German deficit reached 89.3 billion euros. During the first five months of 2026, exports fell another 14.5 percent from the same period a year earlier; imports continued to rise. Unsurprisingly, German motor-vehicle exports have been hit particularly hard.
Those numbers capture more than a growing trade imbalance and point to an uncomfortable truth for Europe—and in particular Germany, the continent’s industrial powerhouse. China has moved steadily from customer to competitor in industries that are crucial to the German economy.
This explains why the Franco-German paper feels somewhat different from previous exercises in European “de-risking.” At last, Berlin accepts a proposition that Paris has pressed for years: Interdependence does create leverage, and Europe would be foolish not to use its own. This is particularly true at a time when large parts of European industry are now at risk of disappearing, with millions of jobs at stake and likely political repercussions that are easy to imagine.
The rest of the continent is not to be outdone. In 2025, the EU imported 559.4 billion euros in goods from China and exported 199.6 billion euros, leaving a deficit of 359.8 billion euros. European exports to China were 37 percent higher than a decade earlier. Imports had risen by 89 percent.
Trade deficits do not, by themselves, necessarily establish strategic weakness. Nor is dependence automatically a problem. But in an age of heightened geoeconomic tensions and coercion risks, European governments find themselves asking whether some forms of interdependence leave them exposed to the agenda of a foreign power—and what assets Europe can mobilize in response. The tone can only be music to France’s ears, as Paris has been pushing for a decade for Europe to use the weight of its market as the foundation of a more integrated form of power.
Call it a continentwide commitment to self-deprecation, but talking about power in Europe usually begins with a list of the continent’s major deficiencies: It lacks U.S. military capabilities, it has fewer large technology firms and lags behind the San Francisco Bay Area in terms of investment capacity, it cannot mobilize industrial policy at a scale and speed comparable to that of China, and so on. The list is almost endless, and many of the specifics are difficult to argue with.
But looking at the glass half-empty can distort the perception of reality and impede strategic judgment. Europe has also been sitting on a massive geopolitical asset for decades. Foreign companies want access to some 450 million relatively affluent consumers operating within an integrated regulatory space. Foreign governments rightfully care about whether their exporters can enter that golden-goose market. European rules already de facto shape corporate behavior well beyond the borders of the EU. This is the so-called “Brussels effect,” whereby companies often adopt EU standards across their global operations rather than run separate systems for different markets.
The Franco-German initiative indicates that some in Europe might actually start using the continent’s strength to defend its citizens and its economy from threats and unfair competition.
The Anti-Coercion Instrument, adopted in 2023, was the first important shift. Its purpose is explicitly as a deterrent: If another country uses economic pressure to force the EU or a member state to alter a policy, then Brussels can respond across a wide array of tools encompassing tariffs as well as services, investment, and public procurement.
When U.S. President Donald Trump threatened 30 percent tariffs on European goods, EU governments approved potential counter-tariffs on 93 billion euros of U.S. exports. France and Germany were the most vocal proponents of putting the Anti-Coercion Instrument on the table, too. This was one reason why Trump ultimately settled for peaceful negotiations with Copenhagen last month, even as European governments remained divided about how far they were prepared to go to deter Washington. Yet the move indicated that some strong political taboos were weakening: It was no longer unthinkable to flex the bloc’s geostrategic muscles to deter any foreign power—even a traditional ally—from using economic coercion against the EU.
Now, the French-German proposal goes one step further. Macron and Merz are contemplating restrictions on market access as a response to persistent distortions and practices damaging Europe’s industrial base and threatening jobs in the industrial sector. German officials have compared the proposed mechanism to the United States’ Section 301 powers and argued that Europe, too, needs to be capable of responding within days.
This is moving closer to economic statecraft, but it will not be enough. Europe has accumulated an impressive collection of instruments in recent years, but political willingness to use them has lagged behind.
One could ask whether this is not just too little but too late. Market power is useful while Europe remains indispensable to the Chinese economy, but the balance is shifting quickly. This is particularly true in some key industries such as batteries, clean tech, and electric vehicles. In other words, indispensability won’t last, and the clock is ticking for the EU to take action while it retains leverage.
Building a more geopolitical Europe does not mean that the continent will eventually turn into a military power comparable to that of the United States, nor that the EU will reach the Chinese industrial scale anytime soon. What’s more, trade defenses alone won’t produce cheaper energy or create technological leadership. Protecting an industry and making it competitive are clearly two different undertakings.
The Franco-German letter is an encouraging sign. But a bigger challenge remains. Paris and Berlin still need to implement reforms to revive their waning competitiveness and declining economies. Once the question of unfair Chinese industrial competition is settled, the real work, the harder work, will need to begin: economic reform at home. Alas, a Franco-German nonpaper on the issue is much less likely.