After the Hybrid Cap, Berlin Wants Import Quotas on More Chinese Goods

• EU leaders will react on Thursday to last weekend's deal capping Chinese hybrid car exports to the EU at 350,000 a year, less than half the previous level.
• Germany wants safeguard quotas on chemicals, mechanical engineering and possibly pharmaceuticals, and asks the Commission to propose them by the end of the year.
• China's surplus with the EU rose 21% year on year to $34 billion in September. Beijing says it reserves the right to take the dispute to the WTO.

The EU has capped one Chinese export. Germany now wants to cap several more.

Berlin pushes for more

Bloomberg reports that Germany will ask leaders at the Brussels summit for quotas on additional sectors, among them chemicals and mechanical engineering and potentially pharmaceuticals. It wants the Commission to produce the so-called safeguard measures by the end of the year. Berlin sees the hybrid deal as a step in the right direction but not enough, according to FAZ.

On Wednesday Chancellor Friedrich Merz promised the Bundestag a "robust European answer" to growing unfairness in world trade, without naming China. He said he and French President Emmanuel Macron have tabled proposals, including a new trade defence instrument that would let the Commission react quickly to targeted attacks on industries and supply chains.

The Commission is not closing the door. Economy Commissioner Valdis Dombrovskis told Bloomberg that the imbalances "are not limited to automotive" and that the EU must continue the work "across different other sectors". A senior Commission trade official, Tomas Baert, told a Brussels conference on Wednesday that a structural imbalance remains despite the car deal.

The scale of the gap

The hybrid cap touches a small part of the trade. China's annual surplus with the EU is about €360 billion, Bloomberg notes. New Chinese customs data shows the September surplus with the bloc at $34 billion, 21% higher than a year earlier. China's surplus with the world reached $940 billion over the first nine months of the year, up 8%.

Beijing is pushing back before any proposal exists. A statement on a social media account affiliated with Chinese state broadcaster CCTV said China "reserves all rights to resort to dispute settlement and demand trade compensation within the WTO framework". It added: "If the EU introduces new tricks while negotiating, China's reserved measures will not be merely for show."

What This Means

The hybrid deal was meant to be a template. Berlin is now treating it as a first instalment, which makes the summit the first test of how far the 27 will follow. Smaller exporters to China will be wary of retaliation, and quotas on machinery and chemicals would hit Europe's own supply chains. Watch whether the conclusions ask the Commission for new instruments, and whether they set a date. A year-end deadline would put proposals on the table before China's next retaliation window.