EU to Intensify Action Against Chinese Trade Practices After Hybrid Car Export Agreement

The European Union is preparing to intensify action against Chinese trade practices, encouraged by last week's hybrid car agreement. China accepted an agreement limiting China's hybrid car exports to the EU to 350,000 a year, less than half the forecast volume for 2026. EU trade policymakers believe intensive dialogue has produced results and intend to continue negotiations. However, the EU will also continue efforts to counter Chinese policies that EU trade policymakers consider distortive. EU policymakers believe Beijing responded positively to last week's threat from France and Germany to quickly close the market to Chinese firms. Germany's position marked a sharp change for China's largest European trading partner, which previously opposed assertive measures.

Sources said Chinese Commerce Minister Wang Wentao appeared struck by Germany's shift during meetings with businesses. Sources said Wang noted the potential for a political backlash unless Beijing restrained exports in important sectors, which the sources believed helped secure the agreement. A senior EU diplomat said EU Trade Commissioner Maros Sefcovic attributed China's acceptance to a growing recognition that Chinese exports were damaging China's customers. A second diplomat said credible dialogue required instruments allowing the EU to act when necessary.

Safeguard investigations are expected soon in sectors including pharmaceuticals, chemicals and machinery. The investigations are likely to lead to tariffs and quotas restricting Chinese access to industries where Chinese firms dominate. Such restrictions are viewed as temporary measures while officials develop new instruments.

EU leaders want to present instruments before Christmas to reduce dependence on China and compensate parties affected by Beijing's retaliation. Brussels would particularly welcome an instrument allowing the EU to close the market to Chinese companies if China's government responds with coercive measures. Questions remain about whether such a complicated instrument could be ready by December. A varied group of member states now supports the concept, first proposed in last week's Franco-German paper. A draft statement for Thursday's European Council summit was updated on Wednesday to demand that the commission urgently develop new instruments to address the imbalances. The EU remains reluctant to name China directly. The draft's wording closely reflected unpublished oral conclusions communicated after the previous summit in June.

Tomas Baert, trade adviser to European Commission President Ursula von der Leyen, said on Wednesday that China accepted the need to rebalance exports and discussions would continue. However, Baert said one sectoral solution probably could not resolve structural imbalances, which leaders would assess at Thursday's European Council summit discussing China policy. EU trade enforcer Denis Redonnet will travel to China for talks on medical devices in the next weeks as working-level negotiations continue. Sefcovic will speak with Wang by videoconference in January before another meeting in March.

Commission trade officials will continue developing stronger instruments despite Beijing's warnings of retaliation against any departure from the cooperative agenda. A third senior diplomat said the EU must prepare for escalation without allowing fear to determine policy. The diplomat said member states remained committed to addressing the challenge described as China Shock 2.0 and expected further measures after the hybrid deal. European policymakers fear that delaying protection against high-quality but cheaper Chinese competition could leave little European industry to protect. The far-right Alternative for Germany's recent state-election successes also raised fears in Berlin that populists would act unless mainstream parties addressed the issue.

China's September trade data, published on Wednesday, showed China's trade surplus with Germany rose 201.7% compared with September 2025. China's trade surplus with France increased 251.8% over the same period. China's trade surplus with the whole EU increased 52.3% over the same period. Bertelsmann Stiftung geoeconomics specialist Etienne Hora warned that continuing or accelerating trends threatened European industry, prosperity, the social model and geopolitical capacity while increasing China's supply-chain dominance.

Both parties to the hybrid car deal insisted that quotas must apply to all other countries to avoid breaching World Trade Organization rules. China's commerce ministry said China's quota would not be lower than the quota for any other source of EU imports. Turkey's Trade Minister Omer Bulat met Sefcovic in Brussels on Tuesday. Bulat claimed Turkey, a major automotive hub, would be exempt from the hybrid car quota because Turkey has a customs union with the EU. The European Commission did not immediately respond to a request to clarify whether Bulat was correct. However, trade experts agreed that Bulat's interpretation was likely incorrect. The disagreement may indicate that the EU's changing trade policy is moving too quickly for even some close trading partners to follow.