EU-China trade talks begin as 'China Shock 2.0' threatens European industries

Maros Sefcovic, the European Union's chief trade negotiator, was preparing to board a flight to Beijing on Thursday for what both sides understood as a critical juncture: two days of talks that could either begin to reset the EU-China trade relationship or accelerate toward open conflict. The stakes had been explicitly raised months earlier when Sefcovic warned that the bloc expected "tangible results by October" — a deadline now upon them.

The immediate problem was arithmetic. In 2025, the EU imported roughly 360 billion euros more from China than it exported there, a gap that had widened as Chinese manufacturers shifted their focus from low-cost commodity goods toward higher-value sectors like automobiles, machinery, textiles, metals, and chemicals. This transition — what European officials and analysts had begun calling "China Shock 2.0" — felt different from the first wave of Chinese competition in the early 2000s, which had flooded global markets with cheap, low-tech exports. Now the threat was coming from the other direction: sophisticated manufacturing capacity that was directly competing with Europe's most advanced industries.

The EU had been in formal talks with Beijing since June, but the bloc was not waiting passively for results. Trade enforcement chief Denis Redonnet had told the European Parliament that nearly a quarter of all imports entering the EU were experiencing what he called "sustained and abnormal" increases, driven overwhelmingly by Chinese goods. The commission was simultaneously preparing a new arsenal of trade defense tools, expected to be unveiled to EU leaders in December. Some member states, particularly France, were pushing for a mechanism modeled on the United States' Section 301 authority — a tool that would allow the EU to investigate what it deemed unfair foreign trade practices and impose retaliatory tariffs. Beijing had already signaled it would "respond resolutely" to any such move.

What the EU wanted from this week's talks was specific: limits on Chinese export surges in critical sectors, increased market access for European goods in China, and a system of export licensing for rare earths and other strategic materials after China had restricted those supplies the previous year. The bloc hoped to negotiate voluntary caps — hybrid cars were mentioned as one example — rather than formal quotas, which Beijing had flatly rejected.

But experts were tempering expectations. Penny Naas, director of the Brussels office of the German Marshall Fund, said she anticipated "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 accept this reality, which was why it was moving forward in parallel on new defensive measures.

China's negotiating position was constrained by domestic weakness. Weak internal demand meant the government was relying on exports to sustain growth, leaving little room to voluntarily restrict shipments to Europe. Yet Beijing's threats of retaliation were not rhetorical — the country had previously imposed duties on European cognac and launched anti-dumping investigations into pork and dairy products in response to EU trade actions.

The deeper question hanging over the talks was whether Europe had the political will to act aggressively. Germany, whose economy was most exposed to Chinese competition and for whom China remained the largest trading partner, had historically counseled caution. But even Berlin's stance was hardening as it watched Chinese overcapacity erode its own export-dependent economy. "Europe has the ability to do something more aggressive to stem this China 2.0 shock," Naas observed. "The question is, will they?" That question would likely outlast whatever agreements or disagreements emerged from Beijing.