Author: Revaz Topuria, Research Fellow
On October 8 and 9, European Commissioner for Trade Maroš Šefčovič and China’s Minister of Commerce Wang Wentao met in Beijing for the second round of the EU–China Trade and Investment Consultation Mechanism. The mechanism covers issues such as trade imbalances, export controls, intellectual property, and reform of the World Trade Organization (WTO). The first round took place in Brussels on June 29, when the parties agreed to make progress by October. One week after the Beijing round, on October 15 and 16, EU leaders gathered in Brussels to assess the results achieved.
Following these two meetings, the EU opted for so-called “managed tensions” with China, a course that allows for dialogue on certain issues while leaving problematic questions unresolved. As a result, the two sides have reached a temporary truce, but the imbalance that made negotiations necessary remains.
The EU’s trade deficit with China in goods amounts to approximately €1 billion per day. European Commissioner for Industry Stéphane Séjourné stated that the EU lost 250,000 industrial jobs last year. Before the negotiations, Paris and Berlin called on the European Commission to establish a rapid-response trade instrument that could even restrict companies’ access to the single market. Members of the European Parliament called for a tougher approach, including the possible use of the Anti-Coercion Instrument over critical raw materials. Beijing, for its part, launched an anti-dumping investigation into chemical products imported from the EU just days before the meeting.
Thus, tensions between the two sides are unmistakable, and the EU’s choice of strategy to address the problem will have significant implications both within the Union and beyond its borders.
How the Beijing Negotiations Unfolded
Disagreement over automobiles became apparent at the very outset of the negotiations. According to the Financial Times, China had rejected the EU’s request before the meeting that it voluntarily limit exports of hybrid vehicles. According to the Financial Times, imports of Chinese hybrid vehicles into the EU increased from 3,800 units in October 2024 to 50,000 units in July 2026, prompting the European Commission to consider introducing safeguard measures. Beijing, for its part, had its own leverage: China accounted for 95.6% of the EU’s imports of processed rare earth elements in 2025.
This mutual interdependence was reflected in the outcome of the meeting, although the two sides describe it differently. According to Šefčovič, the agreement on hybrid vehicles creates the possibility of reducing Chinese exports by more than half. Chinese sources, meanwhile, describe the agreement as a mechanism compatible with WTO rules that protects the export interests of Chinese companies, without specifying a quantitative target for export reductions.
What the Parties Agreed On
According to the joint statement, the parties agreed to continue exploring the possibility of reducing tariffs on certain goods within the framework of WTO rules; to continue procedures for negotiating and reviewing price undertakings with individual companies under the EU’s anti-subsidy investigation into Chinese electric vehicles; and to hold technical dialogue on the EU’s Foreign Subsidies Regulation.
The Chinese side stated that it would continue processing export licences for rare earth elements and permanent magnets destined for the EU through a so-called “green channel.” In turn, the EU and its member states will assist China in resolving significant cases involving the licensing of dual-use goods. Šefčovič additionally noted that EU goods, including automotive parts, olive oil, and footwear, would gain better access to the Chinese market. The expected savings on customs duties will amount to at least €225 million. The parties scheduled a ministerial-level video conference for January 2027 and a third meeting for March.
Beyond these issues, what was left out of the agreement is equally important. The product-specific import quotas requested by the European Commission are not mentioned in the document, while the dispute over electric vehicles remains unresolved. The agreement on rare earth elements is also limited. According to Euronews, following the disruptions in 2025, the agreed temporary truce remains in effect only until January 10, 2027.
What the October 15–16 Summit Decided
China is not mentioned at all in the European Council conclusions. In one paragraph, the leaders assessed “global macroeconomic imbalances” and called on the European Commission to continue results-oriented dialogue, make effective use of existing instruments, and urgently supplement the EU’s existing mechanisms with new instruments. This wording is tougher than that of the June conclusions, which referred only to a strategic discussion of the issue.
European Council President António Costa stated that the discussion had demonstrated full unity on accelerating trade diversification and strengthening defensive instruments to support dialogue. European Commission President Ursula von der Leyen was more direct. She welcomed Beijing’s participation in the first-ever agreement to restrict exports of hybrid vehicles, but noted that progress in one sector could not eliminate the structural imbalance. She announced additional safeguard measures under existing legislation and three new instruments:
- The “DiversifyEU” initiative, aimed at reducing dependence on individual suppliers and accelerating the diversification of economic risks.
- A solidarity mechanism, to support member states that become targets of economic coercion or retaliatory measures.
- An instrument to rapidly restrict access to the single market, based on the Franco-German proposal, which would allow the EU to restrict access to its single market quickly, when necessary, in the interests of the Union.
China’s response to the summit was not long in coming. The Chinese Ministry of Commerce described the agreement on hybrid vehicles as mutually beneficial, while dismissing as entirely unfounded the claim that the agreement had been reached as a result of EU pressure. It warned the EU against underestimating China’s determination to defend its own interests. On the same day, according to Reuters, Beijing floated the idea of introducing export controls on 40 technologies in the fields of artificial intelligence, biotechnology, and solar energy production.
What This Means for Brussels and Beijing
The three-pronged approach outlined at the summit, dialogue, the use of existing instruments, and the creation of new ones, corresponds to the first of two possible scenarios described by the Center for Strategic and International Studies (CSIS) before the Beijing negotiations.
Under the “managed tensions” scenario, working groups continue to meet and periodically reach certain agreements, while both sides impose new restrictions whenever necessary. Under the “escalation” scenario, defensive measures trigger faster and more targeted retaliatory steps from China, ultimately rendering dialogue meaningless.
The CSIS benchmark was whether the October deadline would produce at least a superficial agreement without the EU launching significant new investigations. The first condition was met, but the second is now becoming questionable, as von der Leyen has announced the introduction of additional safeguard measures.
A deeper obstacle lies in the diagnosis of the problem itself. China’s position paper published in July points to excess production capacity, indicating that Beijing has no intention of changing its economic growth model. Sector-specific measures, such as export limits or minimum prices, may help manage tensions but will not resolve the underlying problem.
The Chinese Ministry of Commerce’s assertion that pressure has had no effect is consistent with this assessment. Beijing may agree to restrict hybrid vehicle exports if the move is presented as mutually beneficial rather than as a concession. For Brussels, the result is real, but rather modest. China’s willingness, for the first time, to concede on export volumes establishes a precedent for negotiations at the level of specific products—that is precisely what the European Commission was seeking. However, as von der Leyen herself acknowledged, this step does not address the structural trade deficit.
Four important indicators will show which scenario will shape relations between the two sides going forward:
- Whether the agreement on hybrid vehicles will be published with specific quantitative targets and a monitoring mechanism.
- How China will respond to the EU’s introduction of new safeguard measures.
- How quickly export licences for rare earth elements will be issued after the agreement expires in January 2027.
- Whether agreement can be reached with member states on the “DiversifyEU” initiative and the instrument for restricting access to the single market.
What Consequences Could Follow for Member States and EU Candidate Countries?
The CSIS analysis suggests that the costs of managed tensions will be distributed unevenly among EU member states. Decisive action is difficult in a Union of 27 members because they have different interests. Moreover, China’s retaliatory steps are likely to come more quickly and target the most vulnerable sectors.
This is precisely why the solidarity mechanism is as important as the EU’s offensive instruments. Beijing has long preferred to single out individual national capitals as targets, while differences in approach among member states are already apparent. Spain maintains a more cautious position than France and Germany. Lithuania is making more discreet efforts to improve relations with Beijing ahead of its 2027 presidency of the Council of the EU, while Croatia’s president expressed support for Beijing’s position on trade disputes during a meeting with China’s foreign minister.
If escalation begins, the most vulnerable member states are likely to be those with the closest investment ties to China or prominent sectors that are highly dependent on exports, for example, Germany, Hungary, and Sweden. The effectiveness of the European Commission’s new instruments will depend on how willing these countries are to withstand targeted pressure.
For candidate countries, the shift will be less visible but nonetheless significant. The European Commission’s October 6 communication, “Preparing for a Wider Union,” proposes a gradual, merit-based, and reversible approach to integration with candidate countries, primarily into the single market.
If the EU continues developing instruments to diversify suppliers in the single market and restrict access to that market, candidate countries seeking EU membership while deepening their partnerships with China may find it difficult to separate these two policy directions. Consequently, they may have to reconsider their own foreign and trade policies.
This article was translated from the original language with the assistance of AI tools and revised by the author.