The European Union and China have opened a formal three-month consultation process, signing their first joint communiqué since 2019, to tackle a bilateral trade deficit that reached €360bn in 2025. EU Trade Commissioner Maroš Šefčovič, after meeting Chinese Commerce Minister Wang Wentao in Brussels on Monday, described the deficit as “unsustainable” and stated that the status quo is not an option. The two sides set an October deadline for “tangible results,” with Šefčovič to travel to Beijing to assess progress.

The centrepiece of the agreement is a new joint monitoring mechanism for trade flows, which will use commonly agreed data to flag import surges that cross into “amber or red” danger zones, triggering immediate political discussions. This structured early-warning system marks a departure from Beijing’s previous public dismissal of European complaints about overcapacity. The talks also established four working groups covering trade and investment rebalancing, export controls, intellectual property rights, and World Trade Organization reform. Wang Wentao gave assurances that existing Chinese export controls on rare earths and permanent magnets would not disrupt EU supply chains, and both sides agreed to explore further licensing facilitation for European firms.

Viewed from Brussels, the dialogue represents an attempt to manage what European leaders have termed “China Shock 2.0”—a surge of Chinese exports in sectors from electric vehicles to steel that threatens the continent’s industrial core. German auto manufacturers, including Volkswagen and BMW, have seen their China-bound deliveries fall by a third in 2025, intensifying pressure on Berlin to support a negotiated outcome. European industry groups warn that reliance on Chinese components risks “cannibalising” EU factories. The bloc’s 2024 tariffs on Chinese electric vehicles failed to curb imports, and officials now signal that quotas on hybrids and chemicals could be considered if the autumn talks stall.

Technical teams will now begin detailed work to prepare a roadmap ahead of the October meeting. That deadline coincides with an EU leaders’ summit on 15 October and the expiration of China’s suspension of export controls on critical minerals. The consultation framework, while designed to avert a trade war, leaves open the possibility of unilateral EU measures if no progress is made—a stance that European officials say is necessary to defend the bloc’s industrial base and ensure competitive parity.