The European Union and China have reached a common understanding to limit Chinese exports of hybrid and plug-in hybrid cars to the European market. The agreement also includes facilitating the licensing of exports of rare earth elements and permanent magnets, which are important for the automotive industry, green technologies and defense production.
The agreement was announced by European Trade Commissioner Maroš Šefčovič after two days of talks in Beijing with Chinese Commerce Minister Wang Wentao. “We have reached a common understanding to limit Chinese exports of hybrid and plug-in hybrid cars to the European Union“, Šefčovič said.
According to him, the agreement creates an opportunity to reduce exports of these cars from China by more than half. The details of the supply-limiting mechanism are yet to be finalized, with the Chinese Ministry of Commerce describing the agreement as an “understanding” on the trade in hybrid cars.
Access to the Chinese market
The two sides have also reached an agreement to improve access to the Chinese market for European goods. Among the products mentioned are car parts, olive oil and shoes. The current value of exports of these goods is close to €4 billion, and the expected customs duties saved are at least €225 million.
The market access negotiations began in June 2025. They are being conducted against the backdrop of a record EU trade deficit with China, which, according to European estimates, reaches around €1 billion per day. Brussels is pushing Beijing to open up the Chinese market more widely to European companies, while simultaneously discussing legislative measures to limit Chinese companies' access to the European market.
Rare earths remain a key issue
China has agreed to ease licensing for exports of rare earths and permanent magnets. “We have reached a common understanding to further ease licensing for Chinese exports of rare earths and permanent magnets“, Šefčovič said.
The EU accuses China of using European industry's dependence on these materials as a tool for pressure. Beijing has limited their exports in 2025 amid a trade conflict with the United States. Rare earths and magnets are needed to produce electric and hybrid cars, green energy equipment and defense equipment.
Šefčovič described the agreement as the end of the “first phase“ of the negotiations. The results are expected to be discussed by EU leaders at a meeting in Brussels next week.
Pressure on the European Commission to take a tougher stance on China has increased in recent days. Germany and France have called for decisive action against unfair Chinese trade practices, while 44 European industrial sectors have warned that without an effective response to market distortions, Europe will struggle to preserve its industrial base and quality jobs.