China has rejected the European Union’s request to voluntarily limit its rapidly increasing exports of hybrid vehicles to the bloc, as officials from both sides engage in talks aimed at preventing a broader trade dispute. European Trade Commissioner Maros Šefčovič began a two-day negotiation in Beijing on Monday, seeking an agreement to address the growing trade imbalance caused by Chinese hybrid car shipments.

The European Commission initially proposed that China cap its hybrid vehicle exports to roughly 15 percent of the EU market, down from the current share of more than one-third. This cap was presented as a voluntary measure to avoid the imposition of retaliatory tariffs by the EU. However, according to diplomats familiar with the discussions, China refused the proposal.

In response, the EU is considering implementing a temporary safeguard trade defense mechanism that would impose a supplementary tariff on Chinese hybrid cars exceeding an agreed export threshold. This measure could be enforced even without concrete evidence of market distortion. Diplomatic sources indicate that Brussels aims to negotiate a level acceptable to China in private to avoid escalation. However, the safeguard would also need to apply to other trading partners with sizeable hybrid exports to the EU, such as the United Kingdom, South Korea, and Japan.

The surge in Chinese hybrid car exports followed the EU’s decision to levy anti-subsidy duties of up to 35 percent on Chinese electric vehicles, in addition to a standard tariff rate of 10 percent. In retaliation, China imposed anti-dumping duties on EU products including cognac, pork, and dairy.

EU officials have acknowledged that failure to resolve the hybrid car dispute during the Beijing talks would likely precipitate a severe trade conflict. The EU has underscored that its current trade deficit with China, which approaches €1 billion per day, is unsustainable.

Germany and France recently issued a joint statement urging the European Commission to adopt a more assertive stance. They highlighted the significant impact of Chinese imports on critical European industrial sectors such as pharmaceuticals, aerospace, automotive, machine tools, and chemicals. The two countries also advocated for the introduction of a new trade instrument capable of restricting market access for certain products, aiming to deter retaliatory actions.

A diplomat familiar with the situation noted that the detrimental effects on Germany’s industrial base have diminished the EU’s previous hesitation to engage in a trade confrontation with China. The official expressed skepticism about the outcome of the talks, saying that if a simple solution existed, it would have been found already.

Additionally, discussions in Beijing include the EU’s request for China to lower tariffs on some European goods. Diplomatic sources say China has shown reluctance to make significant tariff reductions.

The Chinese Embassy in Brussels did not respond to requests for comment. Beijing’s commerce ministry stated last month that it opposes “voluntary export restrictions.” The European Commission declined to comment on the ongoing talks.