• EU leaders have asked the European Commission to develop a proposal by the end of the year for the new powers, which would be deployed in an extreme case where a rival was seen as attacking the EU's economy.
• The commission is also evaluating trade data to consider replicating a cap on hybrid car imports in other sectors where shipments from China may be surging, including chemicals and machinery.

The European Union is preparing to create new trade powers that could completely shut off access to its single market as part of a dramatic new push to cut the trade deficit with China. EU leaders meeting in Brussels Thursday asked the European Commission, which handles trade matters for the bloc, to develop a proposal by the end of the year, according to people familiar with the matter. The powers would be deployed in an extreme case where a rival, such as China, was seen as attacking the EU’s economy. “If China engages in certain unfair trade practices, we could restrict the entry of Chinese products into the European market, including a complete closure of our market,” Lithuanian President Gitanas Nauseda told reporters on the sidelines of the summit. “That would be an extreme measure, a drastic instrument.”

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As part of a rapidly expanding arsenal of trade powers, the commission has also begun evaluating trade data as a first step toward replicating a cap on hybrid car imports in other sectors where shipments from China — or other countries — may be surging, said a separate person, who spoke on the condition of anonymity.

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The instrument that could be used to shut off access to the EU’s single market is seen as a so-called second-strike measure, the people familiar with the plans said. Its existence is intended to deter rivals from using unfair policies to weaken European companies or from starting a trade war against the EU with retaliatory measures.

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