The European Union likes to see itself as the defender of “rules-based” globalization. Yet by increasingly weaponizing its Foreign Subsidies Regulation against Chinese entities, it risks turning its claim into a parody.

The latest case in which the European Commission, the EU’s executive body, has launched an “anti-subsidy” probe against the Chinese company Nuctech is a revealing snapshot of how Brussels is shifting toward a model of extraterritorial overreach that it once criticized Washington for.

The case dates back to 2024, when the European Commission carried out its first unannounced inspections, under the FSR, at Nuctech’s offices in Poland and the Netherlands.

Brussels spent a long time complaining about Washington’s long-arm jurisdiction — from sanctions enforcement to the extraterritorial use of domestic laws. Now it appears eager to replicate the same US playbook against China.

The FSR itself emerged during the high tide of transatlantic political alignment under the previous Democratic administration of the US, with China being the primary target.

But 2026 is not 2023, when the FSR took effect. The geopolitical landscape has changed a lot across the Atlantic. The EU’s economic stagnation is now impossible to ignore, and many of its problems have little to do with China, but its own policies.

Former European Central Bank president Mario Draghi’s report on European competitiveness warned that the continent suffers from chronic underinvestment, fragmented capital markets, high energy costs, regulatory overcomplexity and technological dependence on the US.

In other words, the EU is falling behind in some sectors because its own policy architecture has become too internally contradictory.

That raises an uncomfortable question for Brussels: does it really believe US technology giants dominate artificial intelligence, cloud infrastructure, semiconductors and digital platforms without massive state support — direct or indirect?

From Pentagon contracts and industrial policy to tax incentives and strategic procurement, the US has mastered subsidy politics while preaching free markets abroad.

The US administration openly boasts that it uses tariff revenues to subsidize domestic companies, citing this as proof of its tariff policy’s success. Its predecessor, meanwhile, sought to lure European enterprises to the US with subsidies substantial enough to tilt the market — under the Inflation Reduction Act of 2022. Yet the European Commission remained mute in response.

The result is an increasingly politicized trade framework of the US masquerading as neutral regulation.

The EU’s so-called “anti-subsidy” investigations into Chinese electric vehicles poisoned China-EU economic relations for a considerable time, triggering retaliatory tensions, before eventually edging back toward negotiation and pragmatic compromise on the part of the EU. That episode should have served as a lesson on the costs of weaponizing trade instruments.

As for the Nuctech case, the EU’s executive arm demanding sweeping China-based information from Chinese entities and financial institutions inevitably raises legal and political red lines.

China’s Ministry of Justice declared on Friday that the European Commission’s cross-border investigative demands constitute “unlawful extraterritorial jurisdiction”. The accompanying statement from China’s Ministry of Commerce opposes Brussels forcing Chinese banks and companies to hand over unrelated domestic information, disrupting their normal business activities and undermining legal certainty for companies operating in Europe.

The European Commission has become increasingly reckless in launching lose-lose probes, while the economic and diplomatic consequences are left for others in the bloc to absorb. European manufacturers want market access. European consumers want affordable products. European industries want stable supply chains. Yet policymakers and policy executors in Brussels often appear driven more by ideological signaling than commercial reality.

The EU does not need more economic confrontation with China. It needs serious reflection about why its own innovation engine is sputtering, why energy costs remain punishingly high, and why dependence on technology and security structures of an unreliable ally continues to deepen.

The FSR was conceived during a transatlantic honeymoon that is over. The question now is whether there is enough wisdom in Brussels to recognize the bloc faces a harsher economic reality before regulatory overreach leaves a major economic partner no choice but to fight back.