EU-China trade talks in Beijing widen to deficit and rare earths

European Union trade commissioner Maros Sefcovic has arrived in Beijing for two days of talks with Chinese officials that now centre on the bloc's trade deficit and restrictions on rare earth exports. The meetings are taking place on Thursday and Friday, with Chinese Commerce Minister Wang Wentao expected to be among the main counterparts. The discussions come after months of contact between the two sides and at a time of rising pressure inside the EU for a tougher trade stance.

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The talks are focused on the EU's trade deficit with China, which the source material says exceeds €1 billion a day, as well as Chinese curbs on exports of rare earths and other critical minerals. Beijing has also rejected an EU request for voluntary limits on Chinese hybrid car exports, while Brussels is now considering a unilateral cap on those imports instead. China has warned that it would respond "resolutely" if the EU moves ahead with restrictions against Chinese companies or products.

The negotiations matter because they sit at the intersection of trade, industrial policy and access to strategic materials. Rare earths are essential inputs for a range of manufacturing sectors, and any disruption to supply can affect European industry well beyond the immediate trade dispute. The car sector is also under pressure, with Chinese companies increasingly challenging Europe's top brands and the hybrid market emerging as a new point of friction.

The political backdrop has hardened in recent days. A majority of EU lawmakers backed a more assertive trade policy towards Beijing in a non-binding resolution on Wednesday. On Tuesday, French President Emmanuel Macron and German Chancellor Friedrich Merz urged the EU to prepare a "credible instrument" that could be activated quickly against countries that harm the bloc economically.

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German officials have compared the idea to the Section 301 tariffs used by the United States and to China's own restrictions on critical-mineral exports. China has pushed back against that approach, urging France and Germany to avoid protectionist measures and to uphold openness, cooperation and free trade. The exchange underlines how the dispute has moved beyond a single sector and into a broader argument over how the EU should defend its economic interests.

It also shows that the bloc is weighing faster-response tools if talks do not produce results. What remains unclear is whether Beijing will accept any form of restraint on exports, whether the EU will proceed with a unilateral cap on hybrid imports, and how far the bloc is prepared to go if the talks fail. The outcome of the Beijing meetings is likely to shape the tone of next week's EU leaders' summit, where China is expected to feature prominently.

The wider question is whether both sides can contain the dispute before it develops into a broader trade confrontation.

European Union trade negotiators are heading to China for two days of talks aimed at reaching a breakthrough on cheap hybrid electric car imports. The discussions are intended to reduce pressure on European industry and avoid a broader trade confrontation between Brussels and Beijing. Trade commissioner Maroš Šefčovič and his team are due to begin negotiations on Thursday and continue late into Friday.

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The immediate focus is a possible pilot agreement described as a proof of concept, with the car sector expected to be the first test case. Officials are seeking what they have called tangible, meaningful and measurable results before a meeting of EU leaders in Brussels next week, where China is expected to be high on the agenda. The talks come after months of diplomatic efforts that began at the end of June.

The issue has sharpened since the European Union imposed tariffs on Chinese electric vehicles in October 2024. After those tariffs, exports of hybrid cars reportedly rose sharply because they were not covered by the same measures. Last month, the European Union asked China to voluntarily restrict hybrid exports, warning that safeguards, including possible quotas, could follow if sales were not curbed.

China's response has not been made public. The negotiations matter because they sit at the centre of a wider dispute over trade balances, industrial policy and market access. The material says the European Union is trying to address a record trade surplus with China and protect sectors that member states see as strategically important.

Automotive manufacturing is one of the industries most exposed to the flow of cheaper imports, and the talks are being watched closely by governments and companies across Europe. The political backdrop has also shifted in recent days. Germany's chancellor, Friedrich Merz, has backed a new approach alongside French president Emmanuel Macron that would give European leaders more room to defend trade by limiting access to the single market at short notice.

In a joint paper, Germany and France described a major industrial shock affecting sectors central to the European model, including automotive, chemicals, aerospace and pharmaceuticals. That language suggests a harder line is emerging inside the bloc. The current talks are therefore being seen as more than a narrow sectoral negotiation.

They are part of a broader effort to test whether the European Union and China can manage trade tensions without moving into a full-scale conflict. What remains unclear is whether Beijing will accept any voluntary restraint, whether the pilot deal can be expanded to other sectors, and how far EU leaders are prepared to go if the talks fail. The next key moment will be the outcome of the China discussions and the Brussels leaders' meeting next week.

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