The European Union and China will hold talks this week to address trade disputes as Beijing’s restrictions on exports of key minerals and chips risk disrupting Europe’s auto industry. 

The European Commission will receive a Chinese delegation to discuss rare earth restrictions, which sounded alarm bells among governments and firms across the bloc. Preliminary talks were held on Monday to prepare for the arrival of a high-level Chinese technical delegation on Thursday, said Olof Gill, a spokesman for the EU’s executive arm. 

China announced plans to significantly tighten controls on its exports of rare earths and other critical materials earlier this month. Under the measures, overseas exporters of items that use even traces of certain minerals sourced from China would need an export licence.

In a separate dispute, Beijing is blocking Nexperia from exporting products from its affiliate in China. The move was retaliation after the Dutch government took control over the Nijmegen-based company because of concerns that China’s Wingtech Technology Co — Nexperia’s owner — was seeking to hobble the chipmaker. 

The talks in Brussels will coincide with a meeting between US President Donald Trump and Chinese President Xi Jinping in South Korea to defuse bilateral trade tensions. US Treasury Secretary Scott Bessent said China would delay its expanded licensing regime for minerals by a year while they reexamine it.

Brussels and European capitals have been discussing options to address shortages. The turbulence comes as European industry races to boost competitiveness, while disruptions to global commerce intensify pressure from technological changes. European officials have admitted that there are no quick fixes as relations with China continue to sour.

The EU is working on a contingency plan including boosting production of minerals on its soil, diversifying its network of suppliers and reusing some materials. In addition, it wants to set up a joint purchasing and strategic stockpiling centre, the commission said.

In parallel, European and Chinese officials have initially discussed allowing temporary exports of Nexperia chips to keep supply flowing while a longer-term solution is negotiated, a person familiar with the matter said. Such a move is seen by the auto industry as the most plausible way to avert widespread production outages, the person added.

“We take the situation facing companies very seriously and are in contact with those affected,” Luisa-Maria Spoo, a spokeswoman for the German economy ministry, said Monday in a regular government press briefing in Berlin. “We view potential supply-chain difficulties with concern and are working with China to promote the interests of the German economy.”

She added that Chancellor Friedrich Merz’s administration is in contact with the EU and made its position clear during a meeting on Friday. 

While the commission is seeking a negotiated solution, the EU executive has also been preparing trade options to retaliate against China’s restrictions in an attempt to gain leverage during the talks. 

Commission President Ursula von der Leyen said over the weekend that all options are on the table after France’s Emmanuel Macron last week called for using the anti-coercion instrument, the EU’s most powerful trade tool, in the dispute with China. 

“The essence of China-EU economic and trade relations lies in complementary advantages and mutual benefit,” China Foreign Ministry spokesman Guo Jiakun said at a regular press briefing in Beijing on Tuesday. “We hope the European side will honor its commitment to supporting free trade and opposing trade protectionism, refrain from frequently adopting restrictive measures, and instead resolve trade issues through dialogue and consultation.”

Source: Bloomberg

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