EU, China to hold Beijing talks to avert trade war

EU trade chief Maros Sefcovic will travel to Beijing Thursday for two days of high-stakes talks aimed at staving off a trade war with China.

The trip comes as the European Union has toughened its stance towards Beijing to defend businesses against what it believes is unfair competition in sectors ranging from cars to industrial goods.

Increasingly European leaders and observers warn of a "China Shock 2.0", used to describe Chinese firms' expansion into more advanced industries.

Policymakers argue the trend could threaten many traditional EU sectors, echoing the impact of a wave of low-cost Chinese imports in the early 2000s.

EU and Chinese officials have been negotiating since June over Brussels' concerns about the growing trade imbalance between the two economies.

At the same time, the bloc is preparing additional trade-defence measures, while Beijing has warned it could retaliate.

French President Emmanuel Macron and German Chancellor Friedrich Merz have urged the EU to strengthen its legal tools to respond more quickly to trade disputes with China, according to a letter seen by AFP on Monday, including the ability to cut off access to the European market if necessary.

Sefcovic raised expectations earlier this year when he warned the EU wanted "tangible results by October". Analysts, however, are cautious.

"There may be a few crumbs, but I would not expect any kind of major breakthrough," said Penny Naas, of the German Marshall Fund.

Zhu Tian, economics professor at Shanghai's China Europe International Business School, said the talks could yield agreements "on some specific issues" but were likely to result in a "broad settlement of the trade relationship".

Brussels appears to share that assessment. The European Commission is continuing work on new instruments designed to protect key industries, with proposals expected to be presented to EU leaders in December.

- 'Worrying trends' -

According to EU figures, the deficit with China reached about 360 billion euros ($400 billion) in 2025. Chinese figures place the imbalance lower, at around $292 billion.

The EU's trade enforcement chief, Denis Redonnet, told the European Parliament last week that machinery, textiles, metals and chemicals were among the sectors experiencing "sustained and abnormal" import increases.

He said there were "potentially worrying trends" affecting almost a quarter of all EU imports, driven largely by Chinese products.

Sefcovic has identified three priorities: addressing surging imports in strategically important sectors, increasing European exports to China, and improving access to critical raw materials.

The EU is also seeking clearer export-licensing arrangements for rare earths and other materials after China introduced restrictions last year.

Brussels hopes to manage Chinese exports through voluntary limits, for example on hybrid cars shipped to the bloc. Beijing, though, firmly opposes import quotas.

Many economists say weak domestic demand has made exports increasingly important to China's growth model, potentially limiting Beijing's flexibility in the talks.

- How far will Europe go? -

With expectations for major concessions low, an EU official speaking on condition of anonymity said work was continuing on new trade instruments.

Several member states, including France, have advocated a European version of Section 301, the US mechanism used to investigate alleged discriminatory foreign trade practices and impose retaliatory measures.

Responding to reports last week about such a tool, Beijing warned it would respond strongly to "discriminatory restrictive measures".

The warning carries weight. Beijing has previously responded to EU trade-defence actions with duties on European cognac and investigations into pork and dairy imports.

It is unclear how far the EU as a whole would be willing to escalate tensions with China.

Germany, whose largest trading partner is China, has been especially cautious. However, Berlin has adopted a firmer stance amid concerns Chinese industrial overcapacity is hurting parts of its export-driven economy.

Europe has "the ability to do something more aggressive to stem this China 2.0 shock", GMF's Naas said. "The question is, will they?"

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