The European Union (EU) and China concluded crisis trade talks at the end of last week, with both sides pointing to a “crucial first step” that had yielded a broad, preliminary understanding.
The EU delegation had headed to Beijing with a mission to reset trade relations with China and avert an all-out trade war.
Chinese Vehicle Exports Cut by More Than Half
In a joint statement, the EU and China said they had reached an “understanding on trade in hybrid vehicles in a WTO-compliant manner.”
Under the preliminary proposals, China has agreed to limit hybrid-car exports to the EU and ease restrictions on the supply of critical raw materials, such as rare earths.
European Commissioner for Trade Maroš Šefčovič said the deal could cut projected exports of Chinese hybrid and plug-in hybrid vehicles to the EU by more than half over the next four years.
“By this step, we are actually preventing several million car exports from China to the European Union.”
In 2027 specifically, 500,000 to 700,000 fewer Chinese vehicles would be imported into the EU under the proposals.
The European Automobile Manufacturers’ Association (ACEA) responded positively to the deal, with Sigrid de Vries, ACEA Director-General, noting that it could “help facilitate the transition to a new era of Chinese presence in the European market in an orderly way, and this is in the long-term interests of all parties.”
ACEA has long highlighted the destabilizing effect that the sudden and rapid rise in imports of plug-in hybrid electric vehicles and hybrid electric vehicles from China is having on the European car market.
In H1 2026, the market share of Chinese brands in Europe was 14% for hybrid electric vehicles, up from 2% in 2024, and 25% for plug-in hybrids, up from 2% in 2024.
‘Negligible Progress’
As one might expect, the outcome of the EU-China trade talks has been subject to scrutiny.
Alicia García-Herrero, Senior Fellow at Bruegel, a European think tank specializing in economics, claimed there had been negligible progress toward rebalancing trade and that more powerful measures were needed.
She pointed out that Šefčovič had come back from Beijing having agreed to three “shared understandings” with his Chinese counterparts.
“The EU’s headline gain is a ‘shared understanding’ with China on reducing Chinese exports of hybrid and plug-in hybrid-electric vehicles,” she said.
“However, Europe’s bilateral trade deficit with China is €360 billion, and Chinese automotive exports to the EU are worth around €15 billion. Much of the imbalance derives from increasingly large EU imports of machinery, chemicals, metals, solar panels, batteries and ICT products. A marginal reduction in automotive exports will hardly make a difference.”
‘Lack of Chinese Concessions’
In García-Herrero’s view, the second “shared understanding” reached is even less impactful.
“China will lower tariffs on some European products, including car parts, olive oil and footwear, saving some €225 million in duties—again, marginal compared to the overall trade deficit.”
The third “shared understanding” is the creation of a “green channel” to facilitate licenses for rare earths and permanent magnets.
“Leaving such an agreement to China’s discretion does not guarantee the provision of rare earths when needed, as Washington and Brussels discovered in October 2025.”
Beijing’s own readout of the talks spells out the lack of Chinese concessions and makes it clear that the softening of export controls must be reciprocal.
“Even the EU-issued joint statement mentions potentially softening European export controls on dual-use sectors, which could refer to Dutch export controls on ASML’s exports of advanced lithography, a critical component for advanced AI chips. This could limit the EU’s most important leverage in trade with China.”
Less Motivation to Take a Tougher Stance?
In the meantime, there are concerns in some European quarters that, having obtained some concessions from China and averted an all-out trade war, the EU will be less inclined to take a tougher stance against the tide of Chinese goods pouring into the bloc.
Ahead of the talks, German Chancellor Friedrich Merz and French President Emmanuel Macron addressed a letter to European Commission President Ursula von der Leyen, highlighting the “massive industrial shock” inflicted by China’s exports that was “affecting sectors at the heart of the European industrial model and of systemic relevance—pharmaceuticals, aerospace, automotive, machine tools, chemicals, etc.”
They called for “the full use” of the EU’s existing trade-defense instruments and a “comprehensive framework” with new legal instruments.
These include a new tool to be placed in the hands of the Commission to allow a “decisive and systemic reaction” that could lead to “an immediate cut-off from the internal market if needed.”
Šefčovič will brief a meeting of EU leaders in Brussels later this week on the trade deal with China and seek their approval.
“They would have to see that this is convincing enough to take the other steps. We are in a situation that they [China] could put under threat whole sectors in European industry, literally thousands of jobs, and public opinion and the leaders clearly expect very fast action from our side.”
‘Europe’s Gains Are Too Small’
Summing up, García-Herrero said it was difficult to say whether the EU received more than it gave.
“It got trade relief in one sector and goodwill on rare earth exports. But China still has the opportunity to up the pressure on technology controls, subsidy screening and cybersecurity measures. Regardless of any ‘final score,’ Europe’s gains are too small to address the stated aim of rebalancing the trade relationship.”
Beyond the tactical wins, what really matters to Beijing is that it may have managed to influence the October 15-16 European Council summit, she observed.
“China’s main interest is preventing the European Council from implementing its trade tools, and the agreement in Beijing, made just before the summit, is designed to do exactly that. If European leaders consider this deal to be a good start and thus postpone additional measures, this will be China’s most important gain.”
