EU-China Trade Talks Collapse in Beijing as Tensions Hit Boiling Point

Trade diplomats slammed the door on negotiations today—no handshakes, just hardened stances. Beijing’s granite-walled ministry buildings echoed with the silence of deadlocked deals.

The Sticking Points

Tariffs, subsidies, and good old-fashioned distrust. Neither side blinked. The EU’s trade chief left with a tighter jawline than when she arrived.

What’s Next?

Markets hate uncertainty—but love volatility. Hedge funds are already pricing in a 20% chance of retaliatory sanctions (and licking their lips at the arbitrage opportunities). Meanwhile, corporate treasurers are quietly loading up on Bitcoin as a geopolitical hedge—because nothing says ‘stable store of value’ like an asset that swings 10% before breakfast.

One thing’s clear: when elephants fight, the grass gets trampled. And right now, the grass is your portfolio.

Xi urges EU to ease restrictions as tensions build over trade deficit

During the summit, Xi told Ursula and European Council President Antonio Costa that Europe’s problems didn’t stem from China, and urged the bloc to manage “differences and frictions” appropriately. He added that he hoped the EU WOULD keep its trade and investment market open, and avoid using what he described as “restrictive economic and trade tools.”

Tensions have been building over China’s swelling trade surplus with the EU, which hit €305.8 billion ($360 billion) in 2024. European officials have taken aim at state-supported overproduction of goods like electric vehicles, arguing that it undercuts European businesses.

Ursula said China’s leadership had started examining the overcapacity issue, while also expressing willingness to encourage more local consumption.

She told Li, “We think increasing market access for European companies in China, limiting the external impact of involution, and reducing export controls are important steps forward,” based on a pool report shared with press. She described her meeting with Xi as “excellent,” though no major policy changes were announced.

The summit also produced a joint statement on climate, where both parties committed to advancing new action plans spanning the entire economy. Areas of cooperation listed included energy transition, carbon markets, and low-carbon technologies, with specific mention of methane emissions control and climate adaptation measures.

EU presses China on rare earths, Ukraine, and U.S. deal pressure

European leaders also pressed China to play a more active role in ending the war in Ukraine, stressing the need for an immediate ceasefire and negotiations. “What’s important is that we have a ceasefire and negotiations at the table take place, that there is a true and genuine willingness to find solutions to end the bloodshed,” Ursula said during her press appearance.

Another point of contention was China’s export controls on rare earth materials, which disrupted European auto supply chains back in May. Ursula said the EU needs “reliable and secure supplies of critical raw materials from China,” and noted that Beijing had shown progress by speeding up licenses for some exports. She added that both sides agreed to upgrade the mechanism used to manage these shipments.

New customs figures showed a sharp 245% jump in rare earth magnet exports from China to the EU in June compared to May, reaching 1,364 metric tons. But that number still sat 35% below the volume exported a year earlier.

On Thursday, China’s foreign ministry defended its export controls, calling them “in line with international practice,” while also expressing interest in deeper cooperation on export-related issues with other countries and regions.

Ursula also made it clear that Europe’s relationship with China was “independent of the actions or issues we have with others,” in a nod to increasing pressure from Washington. Her comments come just as the EU closes in on a trade deal with the United States that would lower proposed tariffs on European exports to 15%, down from the 30% that President Donald TRUMP initially threatened.

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