BRUSSELS—The European Union plans to tighten its defences against subsidised foreign companies, marking a sharp increase in the bloc’s effort to assert “strategic autonomy” from China and the US while defending its economic interests.

The European Commission, the EU’s executive body and top antitrust enforcer, on 16 June outlined options to redress what it described as market distortions stemming from state-subsidised foreign firms. The proposals aim to prevent foreign companies that have received significant grants, loans, tax credits or other forms of state aid from acquiring European companies or competing with them for certain contracts inside the EU.