China Warns EU Not to Underestimate Ability to Fight on Trade

China warned the European Union not to underestimate Beijing’s determination to defend its interests, dismissing claims that the bloc’s pressure yielded concessions in recent automotive trade talks.

“The European side cannot fantasize about gaining benefits by exerting pressure, nor should it underestimate China’s determination and capability to protect its own interests,” the Ministry of Commerce said in a statement on Friday. “We urge the EU to work in the same direction as China to promote the sound and stable development of bilateral economic and trade relations.”

The ministry’s comments follow reports that a recent EU summit discussed a “two-track” strategy toward Beijing, pairing ongoing negotiations with expanded trade curbs and the potential use of the bloc’s anti-coercion instrument across additional sectors.

The ministry said claims that the EU leverage forced an agreement on hybrid vehicles are “completely groundless” and stressed that the understanding reached between Beijing and Brussels was mutually beneficial, complied with World Trade Organization rules and averted an escalation of bilateral trade frictions.

The EU is preparing new trade powers that could completely shut off access to its single market as part of a push to trim its trade deficit with China, Bloomberg reported earlier. EU leaders have asked the European Commission to draw up a proposal by the end of the year for the tools, designed for extreme cases where a rival is seen as attacking the bloc’s economy, according to people familiar with the matter. The commission is also assessing trade data to consider replicating a cap on hybrid car imports in other sectors where Chinese shipments are climbing, including chemicals and machinery.

Read More: EU to Boost Its Power to Block Chinese Goods in Trade Fight

Talks between Beijing and Brussels last week resulted in a 16-point agreement spanning trade and investment, export controls and intellectual property rights. The EU said it would institute a cap of 350,000 on the number of Chinese hybrid vehicles that can enter the bloc, a win for Europe’s domestic auto industry.

Read More: EU to Cap Chinese Hybrid Car Imports at 350,000 Each Year