EU-China trade talks begin as 360B euro deficit threatens escalation

Maros Sefcovic, the European Union's trade chief, boarded a plane for Beijing on Thursday with a narrow window to prevent something both sides say they want to avoid but seem increasingly prepared to fight. Two days of meetings awaited him—the kind of high-stakes negotiation where both parties arrive knowing the other side has already begun preparing for failure.

The numbers that brought him there are hard to ignore. Last year, the EU imported roughly 360 billion euros more from China than it sold back to them. That gap has become the central fact of European trade anxiety, a shorthand for what Brussels now calls the "China Shock 2.0"—a phrase meant to evoke the disruption of the early 2000s, when cheap Chinese goods flooded global markets. This time, the threat looks different. Chinese manufacturers are moving upmarket, into cars, machinery, chemicals, and other sectors that Europe has long considered its own. The shift is happening fast enough that Denis Redonnet, the EU's trade enforcement chief, told the European Parliament that nearly a quarter of all imports entering Europe now face what he called "sustained and abnormal" increases, driven overwhelmingly by Chinese goods.

Sefcovic had set a deadline for himself months earlier. In summer, he announced that the EU expected "tangible results by October" from ongoing talks that had begun in June. That October had now arrived, and the talks were happening in Beijing, not Brussels—a choice that mattered. What the EU wanted was specific: voluntary limits on Chinese exports, especially in critical sectors like hybrid cars; a system of export licensing for rare earths and other materials; and increased market access for European goods in China. The third goal was perhaps the most delicate, since it required Beijing to open doors it had kept largely closed.

But experts who study these negotiations were already tempering expectations. Penny Naas, director of the Brussels office of the German Marshall Fund, said plainly that she expected "a few crumbs" at best, not any major breakthrough. Zhu Tian, an economics professor at the China Europe International Business School in Shanghai, suggested the most realistic outcome would be "agreements on some specific issues, rather than any broad settlement." The EU itself seemed to have internalized this pessimism. Even as Sefcovic prepared for Beijing, Brussels was quietly working on a parallel track—new trade defense tools that were expected to be presented to European leaders in December. The message was clear: the EU was hedging its bets.

China's position was equally constrained, though for different reasons. Weak domestic demand meant the government relied on exports to sustain growth. Import quotas were off the table entirely; Beijing had already said it firmly opposed them. What China faced was a choice between accepting voluntary limits that would slow its own economic engine, or watching the EU build new weapons to restrict Chinese goods anyway. Several European nations, including France, were pushing for what they called a "European equivalent of Section 301"—a reference to the trade tool that Donald Trump had wielded against foreign practices he deemed discriminatory. When reports of this proposal leaked last week, Beijing responded with a warning: it would "respond resolutely" to any "discriminatory restrictive measures." These were not empty words. China had retaliated against previous EU trade actions by imposing duties on European cognac and launching anti-dumping investigations into pork and dairy products.

The EU was also developing a separate tool to help European businesses diversify their suppliers away from China in critical sectors, using government funding to ease the transition. But even this defensive move raised questions about European unity. Germany, which trades more with China than any other EU nation, had been cautious about aggressive moves, worried about provoking Beijing. Yet Berlin's own concerns were shifting. As Chinese overcapacity threatened to undercut German exports, even Germany's traditional caution was beginning to crack.

What remained unclear was whether the EU, as a bloc, had the will to follow through on the more aggressive measures it was preparing. Naas posed the question plainly: Europe had "the ability to do something more aggressive to stem this China 2.0 shock," but "the question is, will they?" Sefcovic's two days in Beijing would offer some clues, but the real test would come in December, when the EU's new trade tools were unveiled and Beijing had to decide whether to negotiate or retaliate.