Many thanks to everyone who joined us for our conversation on the current state of EU-China trade tensions following the recent interim agreement on hybrid vehicles, and of course special thanks to Xie Yanmei and Finbarr Bermingham for sharing their time and their fascinating insights.
This conversation also follows our recent paper with the Friedrich-Ebert-Stiftung, of which we shared a preview in a previous newsletter. Drawing on a large corpus of Chinese-language texts published between October 2022 and September 2026, the paper analyses Chinese perspectives on EU-China trade tensions. You can now download the full PDF here.
We hope this live discussion will be the first of many—stay tuned for more interesting discussions around the topics that we write on.
You can find a very short AI summary of the one-hour discussion below, but I encourage you to watch or listen to the full conversation.
— Jacob Mardell
SUBSTACK LIVE: EU-CHINA DEBRIEF
With Yanmei Xie and Finbarr Bermingham
Yanmei Xie is a Senior Associate Fellow at MERICS
Finbarr Bermingham is Chief Europe Correspondent for the SCMP
Recorded on 19 October 2026
Yanmei (MERICS, RAND, Asia Society Switzerland) and Finbarr (South China Morning Post) both said they had been surprised by Germany’s shift.
Yanmei noted that Germany had long been China’s most effective advocate in the EU. It is now pushing a tougher line together with France.
Finbarr said the hybrid vehicle concession has not softened member states’ resolve. Officials believe that combining dialogue with the threat of new instruments has worked, and they intend to keep up the pressure. He noted that China’s Ministry of Commerce rejected that reading, stating that pressure was not what produced the result. He described the hybrid deal as a negotiated safeguard. The EU caps imports and China agrees not to retaliate, sitting uneasily with WTO rules. Safeguards apply to all trading partners, which has displeased Japan, South Korea and the UK.
Brussels regards them as a stopgap until it has tools that target China alone. According to Finbarr, von der Leyen told EU leaders that chemicals and industrial machinery are the next priority sectors for safeguards.
The Commission aims to present three instruments in December:
Diversify EU would require firms to diversify suppliers.
A solidarity mechanism would compensate companies hit by Chinese retaliation. It would make it easier for member states to support EU measures.
A “kill switch” would allow rapid restrictions on Chinese firms’ market access. Finbarr said it is undecided whether this will be a new instrument or a revised Anti-Coercion Instrument. The ACI has never been used because it requires a majority of member states to activate and is slow. The proposal would reverse this, so that a qualified majority would be needed to block it.
Yanmei said Beijing sees the hybrid deal as a one-off, at least for a long time. It hopes the deal will strengthen voices in Europe that favour negotiation over confrontation, including those in Brussels who argue that the EU and China share an interest in reducing overcapacity.
China’s growth depends heavily on exports, and Europe is where its carmakers recover the margins lost in domestic price wars. That gives the EU leverage, but it also makes Beijing determined to keep selling to Europe and unlikely to accept a drastic curtailment of exports. China might agree to some restraint on certain chemicals. Machinery, a strategic priority in successive five-year plans, will be harder.
Asked whether there is growing concern in China about the trade surplus, she said Chinese economists are generally concerned about the direction of the economy. Exports are carrying growth while domestic demand is weak, and economists tend to argue for rebalancing and stimulus to boost domestic demand. On the Industrial Accelerator Act, China appears unconcerned. By the time it takes effect, Chinese gigafactories will already be operating in countries such as Spain, which have little interest in requiring technology transfer and give access to the whole single market.
Finbarr noted that China’s consultation response was strongly worded. He added that Chinese carmakers investing now may be able to get ahead of its conditions.
Yanmei said Chinese analysis treats EU regulation as a compliance matter that companies can be helped to navigate, while it treats the US as politically hostile.
Asked why the EU now prioritises restraining Chinese exports over Chinese import commitments, Finbarr said this is a recent shift. Years of market-access requests produced little, and the damage to European industry comes from Chinese exports. Yanmei added that the EU can enforce restrictions in its own jurisdiction, whereas import commitments depend on Beijing and are harder to monitor. Chinese offers to buy more have mostly involved agricultural goods, while the EU’s concern is high-value industry.
Yanmei also stressed the limits on the EU. WTO rules require trade defence to follow proven injury and target individual sectors. Chinese firms assembling cars inside the single market will be outside the reach of trade defence instruments. She said it was hard to see how the kill switch would fit WTO rules, though if the Anti-Coercion Instrument could be justified, a similar way might be found.
Yanmei and Finbarr agreed that new instruments take years to become effective. Asked by Finbarr whether such measures would help European industry, Yanmei said that keeping production in Europe matters, because industry needs its home market to maintain scale. European firms are competing with the Chinese state rather than with Chinese companies. Chinese firms can sustain years of price wars and losses while still raising capital from largely state-owned banks. No European firm can do the same.
Finbarr said a common view in Brussels is that 90 per cent of China policy is domestic policy. He suggested the EU may keep negotiating with Beijing while it strengthens its own defences. The principals hold a video call in January and meet in March. He questioned whether the hybrid deal can be replicated in more complex sectors, how long the EU’s confidence would last if Beijing restricted rare earths again, and whether the new approach would survive a change of government in Paris or Berlin. Yanmei will be watching whether Berlin is satisfied by the hybrid deal or keeps to the Franco-German line.
READ MORE
Chinese Perspectives on the EU–China Trade Conflict
Update: The full paper has now been published and can be downloaded here.
