The European Union’s top trade official arrived in Beijing this week to engage in high-level discussions aimed at addressing the growing trade imbalance between the bloc and China. Maroš Šefčovič, the EU commissioner, began a two-day visit focused on reducing tensions stemming from China’s expanding trade surplus, which has reached approximately €1 billion daily.

Šefčovič’s meetings include consultations with Wang Wentao, China’s commerce minister, as both sides seek ways to ease frictions that have intensified amid mounting European concerns. Officials from the EU attribute the surge in low-cost Chinese exports to significant job losses in European manufacturing sectors, with Šefčovič previously warning that China’s trade practices pose risks not only to industry but also to Europe’s broader social model.

A particular point of contention involves China’s refusal to limit exports of plug-in hybrid electric vehicles (PHEVs). Following tariffs imposed on Chinese battery-only electric vehicles, shipments of PHEVs to Europe have increased sharply. European representatives have indicated that failure to reach a resolution on this issue could derail the current negotiations and worsen trade relations.

While China has declined to reduce its export volumes, it has reportedly proposed enhancing direct investment into Europe and increasing imports from the EU. Beijing has also expressed willingness to discuss minimum prices for electric vehicle exports, conditioned on the removal of anti-subsidy tariffs as high as 35 percent. However, European officials consider these proposals inadequate, pressing for tariff reductions on Chinese goods to improve the competitiveness of EU exports in the Chinese market.

Negotiations remain complicated by China’s demands for the EU to lift certain technology export restrictions, including those affecting chipmaking equipment supplied by Dutch company ASML. Chinese authorities have also issued warnings of a firm reaction to any new trade barriers targeting Chinese businesses or products. Potential retaliatory actions cited include export restrictions on critical minerals and the imposition of tariffs.

Reflecting the growing strain, Germany and France recently proposed a contingency trade mechanism to the European Commission that would empower the EU to restrict China’s access to the single market if necessary. This measure is intended to counter what both countries described as the increasing “weaponisation of trade” and systemic market distortions by China.

China’s state media have criticized the EU’s consideration of such unilateral measures during ongoing dialogue, arguing that these actions undermine the sincerity of the talks. As negotiations continue, the outcome will be closely watched for its impact on the future of EU-China economic relations.