EU trade Chief seeks to rebalance EU-China trade as Brussels weighs tougher measures

EU Trade Commissioner Maroš Šefčovič expressed concerns on Friday about the delicate balance in negotiations with China, as the EU grapples with conventional trade measures and broader political considerations. After months of talks, Brussels and Beijing agreed on October 9th to limit imports of hybrid cars from China; however, this agreement is unlikely to substantially reduce the EU's massive trade deficit with China, which now stands at €1 billion daily. The European Commission aims to shrink this gap.

Šefčovič highlighted the threat to various sectors, with each head of state and government worried about potential significant job losses. He emphasized the need for a combination of traditional trade techniques and a more political approach to strike a balance between China and the European Union's trade.

Negotiations at a technical level are ongoing until the end of the year, while political discussions are planned for January and March 2027. However, given the urgency, EU leaders have given the European Commission a political mandate to work on a "kill switch" tool. This would enable Europeans to block China's access to their market if economic distortions occur.

The October deal introduced country-specific quotas, allowing 350,000 Chinese hybrid cars into the EU annually over four years, with a 6% annual adjustment rate. The Commission hopes to extend the agreement to other sectors, but this progress depends on Beijing's response to EU efforts to strengthen trade defense tools.

The Commission unveiled a new instrument on October 9th to encourage EU companies to diversify their suppliers of strategic products and reduce their dependency on China. It also aims to present a proposal for the "kill switch" during the same week and before the December EU summit. Driven by France and Germany, this tool would allow the Commission to take drastic measures against Beijing if significant economic pressure is placed on the EU market.

Another unilateral EU trade defense measure targeting Chinese chemicals and industrial machinery could also be implemented in December, risking Chinese retaliation. China's exports to the EU have continued to increase, rising by 25% over the past year, according to the latest Chinese customs data.