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As the EU’s trade deficit with China keeps widening, the European Commission wants to revisit the WTO rule requiring members to extend the lowest tariff granted to one partner to all, known as the “Most Favored Nation” principle under global trade rules.
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The status is important as it has shaped trade for decades and allowed countries like China to benefit from low tariffs even as it transitions from an emerging to a sophisticated market as the world’s second largest economy.
With this new proposal, Brussels would link low tariffs to reciprocal market access. The move comes as European companies face persistent barriers in China, which has grown its trade surplus with the world and the EU despite calls to rebalance the relationship.
“The low tariffs should be matched with equal access to your [a trading partner’s] markets,” Šefčovič said on Friday after a meeting of EU trade ministers in Cyprus, adding: “I think that there has to be fairness on both sides.”
EU’s goods trade deficit with China keeps ballooning
The issue is set to surface at the WTO’s ministerial conference in Cameroon in March, one year after President Donald Trump jolted global trade with sweeping unilateral tariffs that challenged the multilateral system and have now been struck down by court.
WTO reform will dominate the gathering as policymakers grapple with a geo-economic landscape shaped by increasingly nationalist trade policies in both the US and China.
The “Most Favored Nation” rule was designed to prevent discrimination among trading partners. But Brussels now sees it as contributing to structural imbalances with China.
“When this principle was embedded into the international trade law and WTO practices, simply the world was different,” Šefčovič said. “The GDP of China represented around 5 to 6%. Today we are at the level of 20%.”
The EU’s goods trade deficit with China widened to €359.3 billion in 2025.
Critics have long argued that Beijing has not fully adhered to WTO practices since it joined the institution in 2001, citing extensive Chinese government state subsidies. Since, its economy has grown to become the second largest in the world only behind the US.
“The past three decades global trade has changed profoundly. Some WTO members have dramatically expanded their share of global trade, while keeping their own markets relatively closed,” Commissioner Šefčovič said on Friday. “And at the same time, state support and non-market policies have multiplied.”
The “Most Favored Nation” rule has also been called into question by the deals struck over the past year by the US with trading partners under the threat of steeper tariffs.
The EU-US agreement concluded last July sets 15% US tariffs on EU goods, while the EU committed to granting preferential treatment with zero tariffs on US imports.
Still, the trade agreements announced by the Trump administration have not been notified to the WTO, even though members are required to do so to allow others to assess their compliance with WTO rules.
The tariffs have also been declared illegal by the US Supreme Court on the basis that the president exceeded his mandate by invoking emergency laws to push them. The ruling adds uncertainty to an already complex geopolitical context.