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.

“Sometimes, it’s even popular to start a trade war, but it’s very difficult to finish it,” the EU trade chief recalled later in an interview with POLITICO.

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.

“You have to deal with the same partner across the table,” Šefčovič said of the risks of starting a trade war, in the interview with POLITICO in August. “So if you can avoid this, it would be much better.”

Market power

Šefčovič’s opening move was to focus on an area where Europe still has leverage: access to its market of 450 million people.

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. Chinese carmakers accounted for just 2% of both the European hybrid and plug-in hybrid markets in 2024; by the first half of 2026, their respective shares had risen to 14% and 25%, industry figures show.

The Commission was preparing to restrict hybrid imports even without an agreement. But a negotiated settlement also offered Šefčovič something valuable politically: evidence that engagement with Beijing could deliver tangible results.

The negotiations were intense, according to a person familiar with the talks on the Chinese side.

“It was very, very tough,” the person said, speaking on condition of anonymity to discuss the closed-door negotiations. “Both sides hadn’t seen such intensity in a long time. No summer break, no holidays. They worked around the clock even one, two days prior to Šefčovič’s trip to Beijing.”

While pursuing dialogue, Brussels also wanted to convince Beijing that it was prepared to take tougher action if the negotiations failed.

Šefčovič had earlier flagged plans for a new “diversification instrument” that would require businesses in critical sectors to source essential inputs from at least three suppliers — a move to reduce China’s ability to exploit Europe’s dependence on its critical raw materials.

Then, just three days before Šefčovič’s trip to Beijing, France and Germany raised the stakes.

President Emmanuel Macron and German Chancellor Friedrich Merz called for a powerful new trade weapon that would allow Brussels to restrict — or even shut off — access to the European market within days for countries deemed to have severely distorted the bloc’s single market.

The proposal did not explicitly name China, but Beijing was its obvious target. 

Keeping it together

EU leaders are expected to welcome the agreement but also press the Commission to act quickly to strengthen the bloc’s trade defenses, according to several diplomats. The understanding reached in Beijing has bought time, but hasn’t settled how far Brussels should go if Chinese exports keep rising or negotiations stall.

“We’re losing thousands of jobs in industry; olive oil and ice cream won’t solve the core issue,” said one EU diplomat after Šefčovič briefed ambassadors on Sunday, referring to reported deliverables from the talks.

A senior German official welcomed the Beijing deal as a first step in the right direction. “It’s a positive sign — which, of course, doesn’t fully solve the problem of the trade deficit with China,” the official said.

But Berlin’s support for a tougher line might prove short-lived.

Alicia García-Herrero, a senior fellow at the Bruegel think tank, argued that Beijing’s concessions had been calculated to assuage Berlin, given the importance of the automotive industry to the German economy.

“I’m just hoping Merz doesn’t turn away from the letter he sent to the Commission,” she said. With the German chancellor politically weakened at home, García-Herrero fears he may be reluctant to risk a prolonged confrontation: “I worry Merz will take this quick win and run.”

That leaves Šefčovič facing a balancing act: keeping EU governments on board with continued engagement with China while maintaining a credible threat of tougher action if the talks break down. 

“I expect [leaders] to give the Commission a nod to move ahead with other trade defense measures. China may see this as a betrayal. If that is the case, we could return to conflict very quickly,” said Noah Barkin, a senior adviser at the Rhodium Group’s China practice.

The battle ahead

For Šefčovič, the challenge now is to turn a limited breakthrough on cars into a broader rebalancing of trade with China — while buying Europe time to strengthen its defenses should the negotiations fail.

“There is an argument for doing to China what China had done to Europe for years — bogging Beijing down in dialogue and process while Europe gets its tools in place. But the EU needs to make full use of the time that these talks provide,” said Rhodium’s Barkin. 

The trade chief is expected to hold a video call with Wang in January, before the two meet again next March. Those talks will test whether Beijing is prepared to make further concessions in sectors where European industry is increasingly on the defensive, including chemicals.

Another priority is critical raw materials, where China has agreed to continue issuing export licenses for rare earths. Beijing’s grip on their supply gives it considerable leverage over European manufacturers, underscoring the limits of Šefčovič’s negotiating position.

The Commission is also preparing two proposals for December: the diversification instrument, aimed at reducing dependence on Chinese supplies, and a mechanism to shield European industries and regions from retaliation.

The scale of the challenge is daunting. Chinese hybrid imports were worth €6.7 billion in the first half of 2026, against an EU-China trade deficit of €360 billion last year. The agreement offers some relief to European automakers but does little to address the underlying imbalance.

Brussels hopes the hybrid safeguard can serve as a blueprint for protecting other industries facing a surge in Chinese imports.

“We hear our industry. That includes the chemical industry, the wind industry, the furniture industry. We know where there’s a surge, and we know what hits the hardest in terms of our deindustrialization,” a senior Commission official said on Monday.

Šefčovič acknowledged the limits of dialogue in his August interview, warning that negotiations would become harder to sustain without tangible progress.

“What would be very important is to come back to say there is acknowledgment of the issue and there are already some pilot schemes which we want to test and to see if they are working,” he said.

“But if simply there will be no action, then of course it will be much more difficult for us just to talk about these issues.”

Jordyn Dahl in Brussels and Hans von der Burchard in Berlin contributed reporting. 

European Commission President Ursula von der Leyen on Monday pitched using artificial intelligence to streamline administrative procedures for European businesses as part of a broader push to simplify commerce and boost the EU’s competitiveness.

Speaking at a behind-closed-doors meeting of the European People’s Party in Taormina, Sicily, on Oct. 12, von der Leyen said the Commission would introduce an “only once” approach to business reporting. This would let companies submit information once, with AI helping public administrations use the data.

Von der Leyen argued that European companies repeatedly have to report the same information to public authorities, wasting time that businesses — and Europe — cannot afford, according to a copy of her speech seen by POLITICO.

“And this is why we will introduce ‘Only Once’, to report data only once – and with the help of AI the administration will ensure efficient use,” she said.

The speech marks the first time von der Leyen has explicitly pitched using AI specifically to reduce businesses’ administrative workload.

The “only once” principle itself is not new. The Commission already included it in its EU Inc. proposal presented in March 2026, which aims to create a harmonized corporate framework allowing companies to establish and operate businesses more easily across the bloc.

Under the EU Inc. proposal, companies could submit information once through an EU-level digital interface, with relevant data automatically transmitted between authorities. However, the proposal does not specifically envisage using AI to carry out that process.

Von der Leyen did not provide details on how the AI-supported system would operate, whether it would apply to all businesses or when the Commission intends to introduce it.

In her speech, the Commission president also encouraged governments to get on board with simplification efforts by signing a pact not to add extra requirements when transposing EU-mandated legislation into national regulations.

The central principle, von der Leyen wrote in a letter to EU leaders sent Oct. 12, is that “a rule agreed at European level cannot become more complex when transposed or implemented nationally.”

Under the proposed pact, capitals would have to identify and justify additional national requirements that go beyond EU legislation, including assessing their impact on businesses and the single market.

Zoya Shefatlovich contributed to reporting

BRUSSELS — European Trade Commissioner Maroš Šefčovič opened two days of talks in Beijing on Thursday aimed at rebalancing a gaping trade deficit, with failure to reach a deal likely to test Brussels’ resolve to impose tougher trade restrictions.

The meeting marks the final round of an effort launched in June to reset the lopsided trading relationship, and will hinge on whether China’s Commerce Minister Wang Wentao is prepared to make substantial concessions.

If no agreement can be reached to narrow the EU’s €1 billion-a-day goods trade deficit, Brussels and Beijing could find themselves on a collision course. EU leaders will review the outcome of the talks at a summit in Brussels next Thursday, where they will consider next steps.

Arriving in China, Šefčovič said his goal was to balance what he called an unsustainable trade deficit. Heading into a meeting with Wang, he said it was crucial that the talks deliver “tangible outcomes.”

The discussions have zeroed in on cars, with Chinese exports increasingly eating into the market share of European automakers. In August, one in eight cars bought in the bloc was Chinese, thanks largely to a boom in sales of plug-in hybrid electric vehicles.

European negotiators have been pushing China to commit to some form of export restraint — in particular for hybrids. Unlike Chinese-made battery-electric vehicles, which were hit with extra countervailing duties in 2024, plug-in hybrids are not subject to such measures.

Without meaningful commitments from Beijing, the Commission has warned it will resort to unilateral trade restrictions. For cars, it is considering safeguard measures that would mix import quotas and tariffs to protect European automakers.

Chemicals are next. Industry Commissioner Stéphane Séjourné said Thursday that the Commission plans to introduce targeted safeguards on plastics and composite materials, subject to a request from EU governments that Brussels do so.

Wind in his sails 

Šefčovič flew to Beijing with the backing of the leaders of Europe’s two biggest economies — France and Germany — to take a tougher approach to trade.

In a joint appeal on Monday, President Emmanuel Macron and Chancellor Friedrich Merz said the Commission should be given a freer hand to shut off access to the EU for goods from countries that distort the bloc’s single market.

While the two leaders did not mention China in their letter to Commission President Ursula von der Leyen, there was no mistaking the target of their proposed trade “kill switch,” which could be blocked only by a qualified majority of EU countries.

The EU already has a powerful trade weapon in its Anti-Coercion Instrument, designed to counter economic bullying by foreign powers. 

But Brussels has yet to muster broad support from member countries to deploy it, most recently in January when U.S. President Donald Trump threatened to seize Greenland, a Danish territory.

The EU’s difficulty in responding swiftly to trade threats has heightened concerns about a surge in Chinese exports that European officials say benefit from unfair government subsidies. With Trump hiking U.S. tariffs, ever more Chinese exports are heading to Europe — increasing pressure on industries that are already being forced to retrench.

Europe’s heavy dependence on China for processed rare earths and other critical raw materials also leaves it vulnerable to retaliation should relations deteriorate.

“If we aren’t willing to fix the way our model works, then we’ll be destroyed,” said one EU diplomat, summing up the concerns flooding Brussels.

“What’s the point of having [more tools] if the Chinese can shut down our strategic production in a matter of days?”

Low expectations

Although Šefčovič entered the talks strengthened by the Franco-German letter, a second diplomat said they didn’t foresee a deal with Beijing this week.

“He knows that a lot of member states are behind the Franco-German push,” the diplomat said, adding that this “has been seen in China.” 

But Beijing has little room to compromise, given its reliance on exports to sustain growth amid weak domestic demand and a prolonged property slump.

“The Chinese side is starting to recognize that there is a problem. But I don’t think they are ready to enter into a substantial deal,” said Gunnar Wiegand, a former head of the EU diplomatic service’s Asia-Pacific department.

Wiegand, now a visiting fellow at the German Marshall Fund, said Šefčovič had earned a reputation as a dealmaker in talks on Britain’s exit from the EU and in last year’s trade deal with Trump. This time, however, “both sides are bound by their own circumstances,” he said.

Europe is desperate to halt the erosion of its industrial base, while China remains heavily dependent on exports to sustain economic growth. 

“The Chinese are going to object to being singled out. Even if a deal with the EU would be the most rational solution, other important markets for Chinese exports, such as ASEAN countries, will start asking the same. It will undercut their global market,” he said. 

BRUSSELS — Britain is hopeful of doing a deal with the European Union to avoid British businesses being hit by new Made in Europe trade rules, the minister in charge of talks has said.

European Relations Minister Hamish Falconer told POLITICO’s Brussels Playbook Podcast it was “overwhelmingly in both sides’ interests” to strike an agreement on the proposed controls.

“For Europe to be more competitive and able to weather some of the shocks that we’re all talking about, we need to do it together,” he said. “I think that’s such an overwhelmingly powerful case that I am sure we will come to a sensible position on all this.”

Brussels is in the process of updating its trade rules to favor EU producers over those outside the bloc — and London fears some of its businesses will be locked out.

The U.K. has urged the EU to guarantee that British producers won’t be affected. Brussels says it can’t give those guarantees now as the rules are still working their way through the bloc’s cumbersome legislative process.

Yet in the event a deal isn’t reached, London believes its Brexit trade deal, the Trade and Cooperation Agreement (TCA), could force Brussels to think again.

“Our arrangements in terms of how we trade are underpinned by the TCA. That’s a strong arrangement between us which is independently overseen,” Falconer said.

“It provides lots of protections to both sides. Our basic position to our friends is, look, I don’t think European competitiveness is enhanced by putting further impediments in the way of our industrial base.”

There are those in Brussels who agree. In-house lawyers at the EU Council have advised member countries that the bloc’s plans for the Industrial Accelerator Act could violate the union’s international trade deals, according to documents seen by POLITICO.

Falconer suggested the U.K. wanted a “straightforward” and “unfussy” arrangement where U.K. goods were simply counted as being of Union origin under the IAA.

But the minister wouldn’t be drawn on whether success at the upcoming U.K.-EU summit demanded an agreement on Made in Europe — as London had previously briefed.

That meeting is meant to sign off talks on agri-foods, youth visas, and emissions trading — as well as act as a launchpad for further negotiations.

“I don’t wanna get ahead of the discussions. I used to be a diplomat; there’s no discussion or negotiation that is made easier by publicly broadcasting it,” Falconer said.

The bigger reset

The minister rejected suggestions the EU was demanding the U.K. raise tariffs on Chinese cars in exchange for guarantees on the IAA. He stated that he was “surprised” at reports to that effect, adding: “That’s not the kind of conversation that I’m having with my European counterparts.”

Yet a landing zone may be emerging. EU officials and diplomats have previously indicated that reference could still be made to the subject at the meeting — perhaps in the form of a political declaration.

Falconer, who was in Strasbourg on Wednesday for his first European Parliament plenary, confirmed that he would be discussing “future options with European partners” — following Prime Minister Andy Burnham’s suggestion the U.K. could rejoin the EU, or at least its customs union or single market.

He is using the visit to meet with Trade Commissioner Maroš Šefčovič, as well as European Parliament President Roberta Metsola. Of the EU institutions debating the industry act, Parliament is pushing for the strictest line on the Made in Europe rules.

Asked what options he was personally pushing for when it came to the future U.K.-EU relationship, Falconer wouldn’t be drawn, revealing only that Burnham would “say more” in a speech scheduled for around “the time of the summit.”

The meeting still has no officially announced date, though Nov. 20 is the latest in a string of days widely rumored to have been penciled in by diary officials in Brussels and London.

“I have a date in mind, but I don’t want to say it just yet,” Falconer told the podcast. “We will agree that with our friends, and you’ll be the first to know.”