China, EU take a breath after surprise deal brings temporary halt to trade tussle

Weeks of high-wire negotiations between China and the EU culminated in a surprise trade deal that will, among other measures, impose strict quotas on Chinese hybrid car exports to the bloc and slash Chinese tariffs on a variety of European goods.

The deal, unveiled on Friday, takes some of the heat out of searing bilateral trade tensions and temporarily averts the prospect of a bruising trade war – a cooldown augmented by Beijing’s subsequent reduction of value-added tax (VAT) export rebates on certain goods, which could help curb outbound shipments further.

China’s Ministry of Commerce described the deal as an “upward arrangement” based on the country’s outbound shipments of hybrid cars in 2025, adding the agreement would ensure further room for the “stable growth” of Chinese companies’ exports.

French President Emmanuel Macron hailed the agreement during a visit to the Paris Motor Show on Monday, saying that it would help Europe better protect its market from “disloyal competition”.