EU Says China Accord Could Cut Hybrid Car Exports by Half

The European Union and China said they’ve reached an agreement on hybrid cars that could see a drastic cut in exports to the bloc.

“We have reached a shared understanding to moderate China’s exports of hybrids and plug-in hybrids to the EU,” the EU’s trade chief, Maros Sefcovic, told reporters in Beijing Friday. “This opens the prospect of cutting China’s exports by more than a half.”

Sefcovic was speaking after two days of trade talks with Chinese Commerce Minister Wang Wentao meant to show progress on rebalancing a trade relationship that is growing contentious. Officials have yet to specify what exact measures they would take to moderate hybrid exports — a key source of tension between the EU and China.

The EU trade chief added that the two sides had also agreed to open up the Chinese market to EU products like car parts, olive oil and other food items. And he said officials will work on easing Chinese licenses for rare earths, which are needed to build modern technology.

The EU and China are reaching a precarious point in their economic relationship. European leaders are anxious about a trade deficit that has exceeded €1 billion ($1.1 billion) a day and want China to stop flooding the continent with subsidized, low-cost goods that are eroding local industries. If negotiators can’t show progress soon, the EU will discuss new powers that could enable it to block China’s market access.

“I came here with one clear purpose: to start rebalancing the EU-China trade relationship,” Sefcovic said. “The trade deficit is a mountain of challenge for the European Union.”

One immediate focus has been China’s rapidly growing exports of hybrid vehicles, which escaped the EU’s 2024 tariffs on Chinese electric vehicles. The EU is currently preparing measures to limit Chinese hybrid cars by placing tariffs on all imports above a certain quota. Officials discussed the topic during their meetings this week.

Chinese-made cars accounted for about a quarter of European hybrid sales in August, even as growth in Chinese EV imports slowed after facing tariffs.

Read More: EU Plans Import Cap on Chinese Hybrid Cars to Protect Sector

France and Germany increased pressure on Beijing even further this week, calling for the EU to significantly expand its retaliatory economic powers — suggesting it should consider severing trade ties with bad actors that launch trade wars. Europe’s two largest economies also want the EU to investigate whether subsidized imports are harming sectors like chemicals and plastics — probes that could produce more tariffs.

Beijing has preemptively warned the EU against adopting what it called protectionist measures.

Europe’s toughening stance reflects its growing awareness that the trade deficit with China, which reached €360 billion last year, is crippling local industry. At the same time, though, China is increasingly relying on those exports to support its own growth.