The European Union and China have agreed to manage trade in hybrid cars and to keep rare earth export licenses moving to European buyers, stepping back from a dispute that had threatened to spiral into new restrictions on both sides.

The outcome followed two days of talks in Beijing on Oct. 8 and 9 between EU Trade Commissioner Maroš Šefčovič and Chinese Commerce Minister Wang Wentao. It was the second meeting of the EU-China Trade and Investment Consultations. Šefčovič called the results a “crucial first step” toward rebalancing trade between the two, EUobserver reported.

For Chinese automakers, magnet producers and the Asian suppliers that feed them, the talks set the near-term terms of access to Europe. They did not remove the EU's anti-subsidy duties on Chinese-made battery electric vehicles, and the core of the hybrid arrangement has not been made public.

Hybrids, Price Floors and Tariffs

A joint statement said the two sides had reached an understanding on hybrid vehicle trade that complies with World Trade Organization rules, but it gave no details, according to EUobserver and MLex. EUobserver reported that Beijing had rejected an EU demand for voluntary export restrictions on Chinese electric cars hours before Šefčovič arrived.

NewsBytes reported that the arrangement could cut imports of Chinese electric and plug-in hybrid vehicles into the EU by as much as half, and that Šefčovič expected it to prevent millions of car exports from China to Europe. How that reduction would be achieved has not been disclosed.

On battery electric vehicles, the statement pointed to guidance on price undertakings in the EU's anti-subsidy case, under which exporters can commit to minimum prices, The Brussels Times reported. Procedures for those undertakings and related reviews will continue. EUobserver said further talks on tariffs and minimum pricing could allow Chinese EVs into the EU at a lower duty rate.

The two sides also agreed to explore cutting or eliminating tariffs on some goods within WTO rules. NewsBytes reported that China would lower tariffs on certain European products, which it said could benefit almost every EU member state. No tariff lines, rates or timetables were published.

Rare Earths and Export Controls

China said it would keep facilitating fast-track export licenses for rare earths and permanent magnets bound for the EU, according to The Brussels Times. The EU, for its part, will work with member state authorities to prioritize licenses for dual-use goods, items with both civilian and military applications, destined for China.

Both sides pledged to deepen their export control dialogue, to give advance warning and to be more transparent when companies are added to or removed from control lists. The statement did not say the controls themselves would be lifted.

The statement also covered smaller market-access issues. China will speed up recognition of the EU's regionalization approach to animal disease, which confines restrictions to affected areas, and the sides will discuss lifting curbs on animal products linked to bluetongue disease. The EU welcomed Chinese efforts to buy more European medical devices, including through a matchmaking event at the ninth China International Import Expo. MLex reported that a technical dialogue on the EU's Foreign Subsidies Regulation is also planned.

Approval and Next Steps

The package still needs political backing in Europe. NewsBytes reported that leaders of all 27 member states must approve it before it can be implemented, and that Šefčovič said they would need to find it “convincing enough to take the other steps.” He planned to brief EU leaders in Brussels the following week.

Wang said China was not the cause of the EU's problems but a partner in solving them, according to NewsBytes. Sigrid de Vries, head of the European Automobile Manufacturers' Association, welcomed the deal as a way to avoid further instability and to support an orderly transition for China's presence in the European car market, the same report said.

The talks followed months of friction. The EU has restricted imports of Chinese-made electric vehicles and EV batteries and moved to shield its steel industry, while China opened an anti-dumping investigation into EU exports of p-nitrotoluene, a chemical used in dyes and pharmaceuticals, NewsBytes reported.

Ministers will hold a video conference in January 2027 and meet in person again in March 2027, according to The Brussels Times, MLex and NewsBytes. Investors will be watching for three things before then: publication of the hybrid terms, the outcome of individual price-undertaking talks with Chinese EV makers, and whether license approvals for rare earth magnets actually speed up for European manufacturers.