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In the short term, there are concrete risks of retaliation from China, Gambardella said.

"Closing the door to China may thus have very negative effects," he added.

Lin Guijun, a professor of international trade at the University of International Business and Economics in Beijing, said that imposing anti-dumping investigations on European wine, auto parts or vehicles could be a way for China to warn the EU that it is not reasonable to persist in trade protectionism, especially in the current global business setting.

The EU has remained China's top trading partner for 12 years, while China has remained the EU's second-largest trading partner for 13 consecutive years.

Ma Yu, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation in Beijing, said, "For China, having (market economy status) would make it harder for Europe or other economies to impose anti-dumping duties on Chinese goods sold at knock-down prices under the WTO rules, because it would change the method for determining a fair price."

Ma said that is why the EU is unwilling to offer such status to China, since it does not want to see China's foreign trade become more flexible under the WTO framework.

The EU has repeatedly launched defensive trade measures since last year, seeking to impose punitive tariffs against China's competitive steel products.