Šefčovič Puts China Tariff Relief at Almost 4 Billion Euros as Beijing Warns on Overcapacity
China’s Minister of Commerce Wang Wentao and European Commissioner for Trade and Economic Security Maroš Šefčovič ended the second meeting of the EU-China Trade and Investment Consultations in Beijing on 9 October with a joint statement and an agreed list of deliverables, and Šefčovič put the tariff relief on offer to EU exporters at almost 4 billion euros of current export value. On the same day China’s Ministry of Commerce said it would respond as necessary if economies use a US-convened ministerial statement on structural excess capacity, whose 15 signatories, announced 2 days earlier, include the EU, as a pretext for measures that harm China’s interests. The talks took place against an EU goods deficit with China of 238.06 billion euros in the first 7 months of 2026, 12.2 percent wider than a year earlier on our calculation.
What both sides agreed
The joint statement, published by both sides, describes the talks on 8 and 9 October as pragmatic and productive. Both undertook to handle their differences within the framework of WTO rules and to keep working to stabilise the relationship and make it more balanced. A ministerial video conference is set for January, and the third ministerial meeting of the consultations for March 2027.
In the annex, both sides will explore the possibility of tariff reductions or elimination for certain goods, and they reached an understanding on trade in hybrid vehicles in a WTO compliant manner. They will also continue the procedures on corporate price undertakings and reviews in the anti-subsidy case on battery electric vehicles. China will accelerate recognition of the regionalisation principle for eligible EU member states, and both sides will jointly explore ways to lift the restrictions linked to bluetongue. A technical dialogue will open on the EU’s Foreign Subsidies Regulation, and medical devices are covered, including through a matchmaking event during the 9th China International Import Expo. On inverters, the EU clarified that its official guidance is country neutral.
Under export controls, the annex records China as willing to keep facilitating export licences for rare earths and permanent magnets to the EU through its fast-track mechanism, while the EU side will work with member state authorities on priority dual-use licences to China. The annex also provides for advance warning and greater transparency in listing and delisting procedures, and covers intellectual property, through the EU-China Intellectual Property Working Group, and WTO reform.
How each side framed the outcome
The Ministry of Commerce said the meeting reviewed 4 work streams: trade and investment balance, export controls, intellectual property and WTO reform. Its readout lists concerns on both sides to be resolved step by step, naming medical devices, agri-food products and what it called the inverter financing ban, with the aim of balancing trade upward. Wang raised concern over recent EU trade-restrictive measures and said China is “not the source of the EU’s problems but a partner in solving them”. Vice Premier He Lifeng also met Šefčovič on 9 October and called for a stable and balanced key trade partnership between China and the EU, Xinhua reported.
Šefčovič’s remarks, published by the European Commission, cover hybrid vehicles, tariffs and rare earth licensing. He said both sides share an understanding to moderate China’s exports of hybrid and plug-in hybrid vehicles to the EU, which in his words opens the prospect of cutting them by more than half. Lower most-favoured-nation tariffs would cover EU goods from car parts to olive oil and footwear totalling almost 4 billion euros in current export value, bringing at least 225 million euros in duty savings. He also cited easier Chinese licensing for rare earths and permanent magnets. He called the deficit “a mountain of a challenge” and described the package as a first step. For scale, the EU sold 199.49 billion euros of goods to China in 2025.
China’s answer to the 15-signatory statement
The Office of the US Trade Representative said on 7 October that it convened senior officials of 14 economies on the margins of the OECD Trade Committee, and that all 14 joined the United States in signing the joint ministerial statement: Argentina, Australia, Canada, the European Union, France, Germany, India, Italy, Japan, South Korea, Mexico, Poland, Türkiye and the United Kingdom. The text calls structural excess capacity and production “a fundamental challenge for the global economy”. The signatories will work in new sectoral platforms for autos and electric vehicles, batteries, chemicals, foundational semiconductors and solar panels, and committed to meet at technical level before December 2026 to develop terms of reference and share non-confidential information and data. The statement names no country as a source of excess capacity.
Asked about the statement, the ministry’s spokesperson said China had set out its view on so-called overcapacity on several occasions and issued a dedicated position paper in July. China’s position is that capacity questions should be judged in a comprehensive, objective and fair way, and that trade issues should not be politicised. The spokesperson said China opposes what it described as trade protectionism practised by individual countries in the name of overcapacity, which in its view would disrupt the global trading order and the stability of supply chains.
China’s overall goods surplus reached 805.51 billion dollars in the first 8 months of 2026, its customs administration reported, 2.6 percent above the 785.34 billion dollars first reported for the same period of 2025, on our calculation. Exports to the 8 signatory economies or blocs listed separately in the same tables, the EU, the United States, Japan, South Korea, Australia, India, the United Kingdom and Canada, came to 42.0 percent of China’s exports, also on our calculation.
The EU’s goods deficit with China
Eurostat’s annual series shows the EU’s goods deficit with China, excluding Hong Kong, at 371.56 billion euros in 2025, 16.9 percent wider than the 317.94 billion euros of 2024 on our calculation. On the same calculation, EU exports to China fell 6.6 percent to 199.49 billion euros while imports rose 7.5 percent to 571.05 billion euros, so the EU bought 2.86 times as much from China as it sold there.
The 2026 figures show the gap still widening. In the first 7 months, imports from China rose 7.1 percent to 352.23 billion euros and exports fell 2.3 percent to 114.17 billion euros, so EU sales covered 32.4 percent of its purchases on our calculation. The deficit averaged 34.01 billion euros a month, against a monthly average of 30.96 billion euros across 2025, both on our calculation, and July’s 36.57 billion euros was the widest of the 31 months since January 2024, on our reading.
On our calculation, machinery and transport equipment explains the whole of the import rise. EU imports in that category grew 14.1 percent to 197.03 billion euros, an increase of 24.28 billion euros that exceeds the 23.28 billion euros rise in total imports, which means all other categories combined fell slightly. On the same calculation, the category accounts for 55.9 percent of what the EU buys from China, while EU machinery and transport exports to China fell 10.4 percent to 52.19 billion euros.
EU goods trade with China, January to July
| Measure (€ million) | 2025 | 2026 | Change |
|---|---|---|---|
| Imports from China | 328,952.9 | 352,234.0 | 7.1% |
| Exports to China | 116,799.6 | 114,171.3 | -2.3% |
| Deficit | 212,153.3 | 238,062.7 | 12.2% |
| Machinery and transport imports | 172,746.7 | 197,026.4 | 14.1% |
| Machinery and transport exports | 58,250.9 | 52,190.5 | -10.4% |
Monthly values summed from Eurostat data updated 15 September 2026; July 2026 is the most recent month published. Changes are our calculation.
China’s own customs data, compiled in dollars, point the same way. In the first 8 months of 2026 China exported 425.29 billion dollars of goods to the EU, up 15.3 percent, and imported 182.80 billion dollars, up 6.2 percent. That leaves a Chinese surplus with the EU of 242.49 billion dollars, 23.1 percent above the 197.04 billion dollars of a year earlier on our calculation.
Why it matters: The deliverables put the EU and China on a negotiated track with dates attached, but they arrive as the gap keeps widening: the EU’s 7-month deficit was 25.91 billion euros wider than a year earlier on our calculation, with higher imports accounting for 23.28 billion euros of that widening. The hybrid understanding, the electric vehicle price undertakings and rare earth licensing bear on the import side, while the one package Šefčovič valued works on EU sales to China. The EU is also among the 15 signatories of the excess capacity statement announced on 7 October, the day before the talks opened, and China has tied any response to measures that harm its interests.
Outlook: Both ministers meet by video in January and hold the third round of consultations in March 2027, and the Commission President is to assess the outcome and discuss next steps with EU leaders at the upcoming European Council. The signatories of the overcapacity statement are to meet at technical level before December 2026. The next monthly EU trade release, covering August, will show whether the widening of the deficit has continued.
Sources: Ministry of Commerce of China, European Commission, Eurostat, General Administration of Customs of China, Office of the US Trade Representative, Xinhua, The Edge.
