BRUSSELS — When Maroš Šefčovič set out his strategy for engaging with China to European Union ambassadors in July, he had a warning for governments urging tougher action on trade against Beijing. Three months on, Šefčovič has secured a first breakthrough, reaching a deal in Beijing last week to sharply reduce imports of Chinese hybrid cars. The symbolic win marks a small step toward stabilizing a trading relationship that Brussels believes has reached a dangerous tipping point.
The agreement, which will initially cap imports at 350,000 vehicles a year, marks a significant concession from Beijing, whose carmakers have been flooding the European market with increasingly competitive vehicles. For Šefčovič, who negotiated last year’s tariff truce with Donald Trump, the agreement suggests his strategy of engagement backed by the threat of tougher trade measures may be starting to pay off. Šefčovič agreed to launch the trade dialogue at a meeting with Chinese Commerce Minister Wang Wentao in Brussels in late June.
By focusing initially on cars — an area where the EU has leverage as one of the few major markets still open to Chinese manufacturers — the Slovak commissioner hoped to secure a confidence-building win before tackling thornier questions, from critical raw materials to China’s vast industrial overcapacity. At the same time, he worked to coalesce European governments behind a parallel effort to strengthen the bloc’s trade defenses, reinforcing his negotiating position with the threat of tougher action to bring down the EU’s €1 billion-a-day trade deficit with China. The hybrid deal, however, is only the opening move in a much bigger contest.
EU leaders meet in Brussels on Thursday to take stock, weighing the benefits of continued engagement against demands for more aggressive action to protect European industry from a surge in Chinese imports. The meeting will test whether a commissioner who has made a career of finding compromises with difficult partners can maintain Europe’s support for a strategy whose success is far from assured. China’s fiercely competitive manufacturers have become global powerhouses, but they are struggling with weak demand at home.
A prolonged property slump has weighed on consumer spending, while cutthroat competition has triggered price wars. Domestic sales of passenger vehicles fell 28% in September from a year earlier. That makes overseas markets increasingly important.
With the U.S. shutting out Chinese imports, Europe remains one of the most lucrative markets still open to Chinese manufacturers. Šefčovič gambled that Beijing would prefer to accept limits on exports rather than risk losing access to the European market altogether. He set his sights on the automotive sector, where Chinese manufacturers have been making rapid inroads.
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