China-EU Trade Deal Temporarily Averts Trade War After Weeks Of Talks

How China and the EU pressed pause on trade war, and what it took to get there

A surprise trade deal between China and the EU has temporarily averted the prospect of a bruising trade war after weeks of high-wire negotiations.

The agreement will impose strict quotas on Chinese hybrid car exports to the bloc while reducing Chinese tariffs on a variety of European goods.

The deal was unveiled on Friday and has taken some of the heat out of searing bilateral trade tensions.

Chinese car exports to face annual cap

Under the arrangement, Beijing agreed not to retaliate against Brussels’ decision to curb imports of Chinese hybrid cars.

Those shipments will be capped at 350,000 units per year, with the limit rising by 6 per cent annually.

The cap will leave exports at less than half the 800,000 vehicles the EU has projected will be shipped in 2026.

The measures mark a shift from the immediate prospect of escalation towards a managed arrangement covering one of the most sensitive areas in the trade dispute.

EU officials described the outcome as a ‘paradigm shift’ and said that “the nature of the rebalancing exercise has changed”.

How Brussels says it secured concessions

The agreement followed weeks of negotiations in which Chinese officials had rejected the prospect of voluntarily limiting auto shipments.

Asked on Monday how Beijing came to accept the concessions, Brussels framed its position with a time-worn business maxim: “The customer is always right.”

The deal therefore does not end the trade tensions, but it has temporarily prevented them from developing into a wider confrontation between China and the EU.

Its significance lies in the combination of a limit on Chinese hybrid car shipments, lower Chinese tariffs on European goods and a pause in the immediate threat of retaliation.

Source: South China Morning Post