China, EU take a breath after surprise deal brings temporary halt to trade tussle
Weeks of high-wire negotiations between China and the EU culminated in a surprise trade deal that will, among other measures, impose strict quotas on Chinese hybrid car exports to the bloc and slash Chinese tariffs on a variety of European goods. The deal, unveiled on Friday, takes some of the heat out of searing bilateral trade tensions and temporarily averts the prospect of a bruising trade war…
After weeks of intense negotiations, China and the European Union reached a surprise trade deal aimed at cooling tensions and preventing a potential trade war. The agreement, announced on Friday, imposes strict quotas on Chinese hybrid car exports to the EU, reducing their annual limit to 350,000 units, which will rise by 6% annually.
This measure is expected to keep Chinese exports below half of the 800,000 vehicles the EU had projected for 2026. In addition to the quota, China agreed to cut tariffs on various European goods. The deal also includes a reduction in value-added tax (VAT) export rebates on certain Chinese products, which could further curb outbound shipments.
French President Emmanuel Macron praised the agreement during a visit to the Paris Motor Show, stating it would help Europe protect its market from "disloyal competition." Chinese hybrid car exports to the EU nearly tripled between 2024 and 2025, rising from around 107,000 to around 302,000 units. The deal is projected to halve China's share of the EU hybrid market from the current 12%.
Chinese executives expressed mixed feelings about the deal, acknowledging the need to adapt but hoping for better conditions. Brussels hoped the agreement would encourage Chinese firms to establish production chains in Europe, though this would likely increase production costs by 30-50%. The agreement complies with World Trade Organization rules and Beijing reserved all its rights under the WTO framework, including recourse to dispute settlement and seeking trade compensation.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
