We test models for the generation of X-rays in accreting T Tauri stars (TTS), using X-ray data from the classical TTS T Tau. High-resolution spectroscopy from the Reflection Grating Spectrometers on XMM-Newton is used to infer electron densities, element abundances and the thermal structure of the X-ray source. We also discuss the ultraviolet light curve obtained by the Optical Monitor, and complementary ground-based photometry. A high-resolution image from Chandra constrains contributions from the two companions of T Tau N. The X-ray grating spectrum is rich in emission lines, but shows an unusual mixture of features from very hot (~30 MK) and very cool (1-3 MK) plasma, both emitted by similar amounts of emission measure. The cool plasma confirms the picture of a soft excess in the form of an enhanced OVII/OVIII Lya flux ratio, similar to that previously reported for other accreting TTS. Diagnostics from lines formed by this plasma indicate low electron densities (<~ 1E10 cm-3). The Ne/Fe abundance ratio is consistent with a trend in pre-main sequence stars in which this ratio depends on spectral type, but not on accretion. On the basis of line density diagnostics, we conclude that the density of the cool ``soft-excess'' plasma is orders of magnitude below that predicted for an accretion shock, assuming previously determined accretion rates of (3-6)E-8 M_sun/y. We argue that loading of magnetic field lines with infalling material suppresses the heating process in a part of the corona. We thus suggest that the X-ray production of T Tau is influenced by the accretion process although the X-rays may not form in the bulk of the accretion footpoints.