EU and China Reach Breakthrough Trade Deal
Breakthrough Deal
On 9 October 2026, the European Union (EU) and China reached a breakthrough trade deal after intense negotiations in Beijing. EU Trade Commissioner Maros Sefcovic and China’s Minister WANG Wentao issued a joint statement with a 16-point consensus. Late on the evening in Beijing, Commissioner Sefcovic held a press conference to announce the major points of the deal.
Hybrid Vehicles
The centerpiece of the deal concerns hybrid and plug-in hybrids. China agreed to halve its exports to the EU over the next four years, representing several million units.
In 2024, EU slapped high tariffs on pure Electric Vehicles made in China in a bid to put a brake to their onslaught. Then, China rapidly pivoted to hybrids and plug-in hybrids to capture over a quarter of the EU hybrid market.
Automakers’ Reaction
In its official press release, the Association des Constructeurs Europeens d’Automobiles (ACEA) welcomed the ‘positive step’. According to the ACEA, Chinese brands capture 14% of the hybrid electric vehicle (HEV) market and 25% of the plug-in hybrid (PHEV) market in the EU — up from just 2% in 2024. The sudden surge in Chinese vehicles caused ‘market destabilization and could severely disrupt the broader EU economy’.
The ACEA welcomed the regulation of imports is necessary for an ‘orderly transition’ and looks forward to similar measures being extended from passenger cars to buses and trucks. On the other hand, Chinese automakers expressed sign of relief for having avoided an outright trade war and market blockade.
Price Undertakings
Rather than setting rigid quotas, China managed to wrestle the application of ‘price undertakings’ to control volume. In other words, Chinese automakers would set a higher minimum price tag for their vehicles entering the EU market. At the same time, Chinese automakers ‘would accelerate their localization strategy’ within the EU.
Rare Earths
In addition, China has agreed to expedite the licensing process for the export of rare earths and permanent magnets to the EU. It is to be recalled that an earlier export control caused car assembly lines to suspend operation in the EU.
Tariffs Reduction
China will lower tariffs on EU goods worth roughly EUR 4 billion. The goods include olive oil, textile, footwear, and European car parts. The reduction in customs duties is estimated to generate savings of about EUR 225 million.
Ratification and Next Steps
Commissioner Sefcovic underlined that the deal will still have to be examined by the European Council, which could happen next Thursday in Brussels. It is believed that the particulars of enforcing the ‘price undertakings’ will be worked out once the deal is ratified in principle. To follow up, a video conference is scheduled in January 2027, followed by a third round of face-to-face consultations in March 2027.