EU-China agreement limits hybrid car exports and eases rare earths licensing

The European Union and China have concluded a trade agreement after negotiations lasting four months, with Beijing accepting limits on hybrid car shipments and agreeing to relax restrictions governing rare earths licenses. The European Commission presented the accord as an opening phase of efforts begun in June to rebalance bilateral trade.

Quotas set for individual countries will permit annual imports of 350,000 Chinese hybrid cars for four years, with an annual adjustment fixed at 6%. An EU official said the limits would reduce current exports by more than half, compared with an estimated volume of up to 800,000 units in 2026.

The Commission said tariff liberalization affecting footwear, car parts, olive oil and ice cream would deliver duty savings of at least €225 million. The bloc's trade deficit with China is €360 billion.

The accord follows a call from French President Emmanuel Macron and German Chancellor Friedrich Merz for an additional trade-defense tool that could restrict European market access in response to foreign economic distortions. An EU official, speaking anonymously, warned that the concessions might weaken leaders' resolve to pursue tougher measures.

The Commission has promised EU ambassadors proposals for that tool ahead of the December summit. Discussions also cover help for businesses diversifying suppliers of strategic products and assistance for member states subjected to trade retaliation.

Maroš Šefčovič, the EU's trade chief, is scheduled to speak with his Chinese counterpart by video in January. A further round of political negotiations is planned for March.