MNI: EU Action On China Would Cut Off Key Supplies - Advisor

Chinese reprisals to potential European Union trade restrictions on Chinese imports and investments could include retaliatory tariffs and restrictions on supplies of photovoltaic modules and energy storage equipment components as well as on minerals including rare earths, a Chinese policy advisor told MNI.

Reciprocal countermeasures could also include import quota restrictions or tariffs on European dairy products, wine, cosmetics and luxury goods, said Zhao Yongsheng, director of the French Economic Studies Center at the University of International Business and Economics, though he noted that for the moment Beijing still needs to lobby against possible EU action and to avoid taking measures which might harm countries within the bloc which see it more favourably.

Beijing has already threatened retaliation against the European Commission’s proposed Industrial Accelerator Act, which would restrict foreign investment in sensitive areas, introduce “made in EU” procurement requirements, and impose joint venture and technology transfer conditions for Chinese investors. European industry has also pushed for sweeping safeguard action to protect key sectors such as chemicals and cars, along the lines of measures already taken for the EU’s steel producers.

If the Accelerator Act affects sectors in which China has a strong presence, such as batteries, electric vehicles and solar panels, the country could respond accordingly, said Zhao, who describes China’s relations with the EU as more tense than those with the U.S. A response to action targeting Chinese electric vehicles could include reciprocal measures against Europe’s conventional car industry, he said.

But while Chinese investment could be at risk, the room for further reductions in Europe’s imports of Chinese goods is limited, given the EU’s need for supplies in areas such as green energy and following years of derisking by Brussels, he added. (See MNI INTERVIEW: China's EU Surplus To Widen In 2026)

In its efforts to head off EU action, China should seek support among individual member states and within the European Parliament, said Wang Yiwei, director of the Center for European Union Studies at Renmin University, and a former diplomat at the Mission of China to the European Union. Beijing will take a patient approach, he said.

Europe has limited bargaining chips in any dispute with China, given its reliance on Chinese imports and China’s technological advantage in areas such as new energy, both advisors said.

China has already prohibited its firms from cooperating with EU Foreign Subsidies Regulation (FSR) investigations into state support in public tenders, and this week announced a mechanism that grants the government the power to investigate investment barriers in other countries.