On July 24, 2025, a high-stakes one-day summit in Beijing marked 50 years of diplomatic relations between China and the European Union, but the mood was far from celebratory. With trade tensions soaring and geopolitical differences deepening over Russia and Ukraine, Chinese President Xi Jinping bluntly criticised the EU’s trade policies, urging Brussels to “properly handle differences and frictions.”
In return, European Commission President Ursula von der Leyen and European Council President Antonio Costa pressed China to “rebalance” trade relations, calling the current situation an “inflection point” in EU-China ties.
Core Issues at the Summit
1. Ballooning EU-China Trade Deficit
The EU’s trade deficit with China has reached a record €305.8 billion in 2024. European officials accuse China of industrial overcapacity, leading to a flood of cheap exports into the EU market — especially in electric vehicles (EVs), steel, and solar panels.
Ursula von der Leyen stated during the summit:
“As our cooperation has deepened, so have imbalances… We’ve reached an inflection point.”
2. Xi Jinping’s Response: ‘Building Walls’ Is Not the Answer
President Xi responded sharply, asserting that “improving competitiveness cannot rely on building walls and fortresses.” He denounced the EU’s recent trade restrictions and investigations targeting Chinese industries, especially:
- Anti-subsidy probe into Chinese EVs
- Export restrictions on Chinese solar and battery components
Xi warned the EU to avoid “decoupling and breaking chains,” which he said would lead to global isolation and hurt economic recovery.
Electric Vehicles: The Flashpoint of Friction
One of the key triggers of the summit tension is the EU’s anti-subsidy investigation into Chinese electric vehicles. Brussels claims Chinese EV manufacturers benefit unfairly from state subsidies, enabling them to undercut European competitors.
The investigation has drawn ire from Beijing, which sees it as a protectionist move aimed at stifling Chinese innovation. EU officials argue it’s about ensuring fair market competition.
Rare Earths & Supply Chain Disruptions
Another contentious issue is China’s control over rare earth exports, especially rare earth magnets vital for electric vehicles and wind turbines.
- In May 2025, China imposed export controls on rare earths, citing “national security.”
- The move disrupted European automotive production, causing temporary factory shutdowns.
- However, China’s rare earth magnet exports to the EU surged by 245% in June (1,364 metric tons), though still 35% lower than June 2024.
This rollercoaster in supply has pushed the EU to diversify critical mineral sources, investing in African, Australian, and Scandinavian rare earth projects.
Ukraine War: A Strategic Divide
While trade dominated discussions, the Russia-Ukraine war remains a deep divide in EU-China relations. The EU accuses China of indirectly supporting Russia’s war economy, by continuing trade ties and supplying dual-use components.
Back in July 2024, Ursula von der Leyen had accused China of:
“Enabling Russia’s war economy by flooding the global market and undermining sanctions.”
Though von der Leyen struck a more conciliatory tone on X (formerly Twitter) on Thursday, the trust deficit remains high.
Strategic Warnings: Xi’s Message to Brussels
In a veiled warning, Xi urged EU leaders to:
“Make correct strategic choices… refrain from using restrictive economic and trade tools.”
This comment indirectly refers to the EU’s growing alignment with the United States in dealing with China. Experts note that during Donald Trump’s first term, China and the EU had greater coordination. However, the current EU stance mirrors U.S. hawkish policies, undermining any strategic China-EU partnership.
Possible Silver Lining: Climate Cooperation
Despite tensions, one area of convergence remains: climate change. Both sides hope to issue a joint climate statement, with discussions around:
- Cross-border carbon pricing
- Joint green tech development
- Global emissions standards
This is one of the last cooperative fronts where EU-China ties remain somewhat intact.
What’s Next? Trade Deal With U.S. Looms Large
A new twist in the tale is the EU’s likely deal with the U.S. on a broad 15% tariff agreement on key exports — a strategic step to pre-empt harsher tariffs (up to 30%) threatened by President Donald Trump.
If sealed, this deal could further weaken the EU’s trade reliance on China and bolster transatlantic supply chains, particularly for critical tech and energy infrastructure.
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