By Jillian Butler
A hard-fought trade deal between Europe and Beijing is emerging, but it’s unclear if the agreement will change what has become a stark economic reality for the continent.
European Union (EU) envoys agreed to a broad, tentative deal with Beijing in October, which would cut Chinese hybrid car exports in half, Reuters reports. But the potential deal comes off as a pyrrhic victory for Europe, as much of the continent’s industry remains intimately tied to China, including the automotive industry and critical mineral mining. (RELATED: Uncle Sam Planning To Pour Even More Cash Into Africa As Critical Mineral Race Heats Up)
“While this is being ballyhooed by the EU as a great deal, the fact is that 350,000 Chinese hybrids coming into the EU market is still a lot of cars,” energy consultant David Blackmon told the DCNF, “no doubt the European carmakers will grasp at any relief but the deal really isn’t any magic bullet protecting them from Chinese intrusion into what used to be their market.”
While China controls the supply chain for batteries and critical minerals, Europe struggles to maintain a similar level of production.
“We are more than 80% dependent on China for many critical raw materials [and] 90% for some rare earths,” European Commission President Ursula von der Leyen said at a September State of the Union Address, according to POLITICO.
“It’s making life a bit more difficult for the Chinese, but … that’s not going to stop them as it happened to the electric cars,” Felipe Munoz of Car Industry Analysis told Reuters.
Europe has grown dependent on Chinese automotive exports, specifically with hybrid vehicles. China’s exports of hybrids to the 27 EU member states tripled to $7.5 billion in the first half of 2026–triple the $2.5 billion in 2025.
That is almost nine times higher than the $845 million exported in 2021, according to Reuters.
“The number one goal of the Chinese Communist Party is accumulating power. Dependence has to run in one direction only – toward Beijing. Deindustrializing other countries is a means to this end because it renders these countries reliant on China. The Chinese Communist Party accomplishes this through a range of means, including by co-opting elites and competing unfairly — e.g., the Party supports (including through espionage) and subsidizes national-champion firms to enable them to underprice competitors abroad,” Jacqueline Neal, President of the Long Term Strategy Group told the DCNF, “these firms can then capture markets and through that, render other countries dependent on Chinese products, delivering leverage to the Party.”
The European Union did not respond to a request for comment.
The EU trade chief gives the public the rosy half of a possible agreement with China that will appeal to European voters and businesses. For the whole picture, including the possibility of more “dual use” military-capable tech exports to China, read the joint statement published by the European Commission: https://t.co/n9jANcwpQ8
— Anders Corr, Ph.D. (@anderscorr) October 11, 2026
The consequences of Chinese dependence are perhaps no more apparent than in Germany.
Once a hub for the automotive industry, the country now struggles to cope with American tariffs and compete with China — a country that was once a lucrative export market. In the mid 2010s, the number of automobiles manufactured in Germany began to dwindle, as German manufacturers began to build factories in Hungary, China, and Mexico. By the first half of 2026, BMW reported a 20% decline and Mercedes a 28% decline, according to New York Times.
Previously, China was a profitable customer for Germany, with it accounting for 37% of all Volkswagen sales in 2019. In 2025, that figure dwindled to 30%. Interest in western cars has declined among the Chinese as companies such as BYD and Geely Auto developed cars quicker and cheaper while being promoted by the Chinese government.
“Despite better products, we cannot match the cost and pricing of export models from China”, Volkswagen CEO Oliver Blume told his employees in July, according to the New York Times.
China’s also bought significant stakes in German auto companies, with Chinese state owned automotive manufacturer, BAIC, owning a roughly 10% stake in Mercedes, Automotive World reports.
“Europe is going to a point where they will need to decide whether they’re doing what the US is doing or just let the whole industry be bought by the Chinese,” Munoz explained to Reuters, referring to America’s restrictions on Chinese-made automobiles, including a 100% tariff on electric vehicles.
The deal does not appear to deter Beijing.
Zhao Fei, president of Chinese automotive company Changan, said that he was “not that concerned,” and could set up production in Europe to circumvent the export cap.
“This actually provides opportunities for Chinese companies like Changan to enter the European market,” Fei told Reuters, adding that the company is planning to manufacture its first cars in the region in early 2027.
The EU-China deal also includes China dropping its tariff on auto parts, and would continue to fast-track licenses to export rare-earth elements to the EU, POLITICO reports.
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