Can Europe Rebalance Trade with China?

In today's episode, we'll examine the state of EU-China trade relations after a pivotal few weeks that may shape how Europe deals with China for years to come.

Europe's trade deficit in goods with China reached roughly 360 billion euros last year, nearly a billion euros a day, and European Commission President Ursula von der Leyen has called the imbalance structural and unsustainable. Against that backdrop, three events stand out. On October 5, French President Emmanuel Macron and German Chancellor Friedrich Merz sent a joint letter to von der Leyen urging a tougher response, including a rapid-action trade instrument. It was a striking shift for a Germany that has long been wary of confrontation with Beijing. On October 8 and 9, EU Trade Commissioner Maroš Šefčovič and Chinese Commerce Minister Wang Wentao held trade talks in Beijing that produced 16 outcomes, including an understanding to curb Chinese exports of hybrid vehicles through a 350,000-vehicle annual quota. And on October 15 and 16, EU leaders met in Brussels to decide what comes next.

Is the hybrid deal a genuine breakthrough or a pressure-release valve? Does it do enough to prevent a second "China Shock," or will Chinese carmakers simply build in Europe instead? Could tools like the EU's Anti-Coercion Instrument, or its proposed faster successor, ever be used against China? And how will relations between Beijing and Brussels likely develop going forward. I am joined today by Finbarr Bermingham, Chief Europe Correspondent at the South China Morning Post, who specializes in geopolitics, geoeconomics and EU-China relations. He has spent the last five years reporting from Brussels and around Europe on rising bilateral tensions, Europe's place in the shifting world order, diplomacy, trade, and EU politics.

Timestamps:
[00:00] Introduction
[02:26] Outcomes of the Agreement
[04:46] Trading Import Volume for Localization?
[08:20] "Made in Europe" for Chinese Hybrids
[09:16] Unilateral Actions and Ultimatums
[13:16] A Kill Switch for Unfair Trade Practices
[19:32] Measuring EU Unity and Fear of Retaliation
[25:12] Beijing’s Hardline Signals – A Shift to Accommodation?
[29:13] On Transatlantic Coordination
[31:23] What to Watch for a Durable Rebalancing