EU and China launch three-month trade talks to address €360bn deficit and avert trade war

The European Union and China agreed on June 29, 2026 to launch a new Trade and Investment Consultation Mechanism with a three-month timeline to address the EU's €360 billion annual trade deficit with China. The agreement, formalized in their first joint statement since 2019, establishes four working groups covering trade balancing, export controls, intellectual property, and WTO reform. European Commissioner Maroš Šefčovič will visit China in October 2026 seeking tangible results, with a first progress assessment due in September. The talks aim to prevent escalating tensions while addressing EU concerns about the unsustainable €1 billion-per-day trade shortfall and Chinese dominance in rare earth supplies.

EU-China trade consultation mechanism

• ▪The European Union and China issued a joint statement on the Trade and Investment Consultation Mechanism on June 29, 2026, the first of its kind since 2019
• ▪A working group dedicated to trade and investment balancing will be launched immediately and will set up a joint mechanism to monitor trade flows
• ▪European Commissioner for trade and economic security Maroš Šefčovič met Chinese Commerce Minister Wang Wentao in Brussels on June 29, 2026
• ▪Chinese Commerce Minister Wang Wentao travels to Britain on June 30, 2026
• ▪The EU-China Trade and Investment Consultation Mechanism will be divided into four main categories: trade and investment balancing, export controls, intellectual property rights, and World Trade Organization reform
• ▪The European Union and China agreed on June 29, 2026 to establish a new high-level consultation mechanism called the Trade and Investment Consultation Mechanism to manage growing commercial tensions

EU trade deficit with China

• ▪The European Union has a €360 billion trade deficit with China
• ▪European Commissioner Maroš Šefčovič has previously called the EU's trade deficit with China unsustainable
• ▪The European Union has a €1 billion-a-day trade shortfall with China

Export controls on rare earths

• ▪China briefly throttled rare earth exports in fall 2025 in a tariff dispute with the United States
• ▪China dominates the global supply of rare earth elements
• ▪Chinese Commerce Minister Wang Wentao assured that China's existing export controls on rare earths and permanent magnets will not disrupt EU supply chains

Trade negotiation timeline

• ▪A roadmap with expected deliverables for the EU-China Trade and Investment Consultation Mechanism is due in the coming days after June 29, 2026
• ▪European Commissioner Maroš Šefčovič hopes to present the first tangible results of the EU-China Trade and Investment Consultation Mechanism during his October 2026 visit to China
• ▪A first assessment of whether progress is being made in the EU-China Trade and Investment Consultation Mechanism is expected in September 2026
• ▪European Commissioner Maroš Šefčovič will visit China in October 2026

Perspective of European Union

• ▪European Commissioner Maroš Šefčovič views the EU's €360 billion trade deficit with China as unsustainable and requiring correction