MNI: EU To Try To Negotiate With China On Rare Earths Access

The European Union will seek to negotiate directly with China to obtain access to rare earth minerals, while maintaining its cooperation with G7 partners, but Beijing is likely to insist on concessions which Brussels will be reluctant to make such as the lifting of tariffs on Chinese-made electric vehicles, EU diplomatic and trade sources told MNI.

While EU officials have said that they will pursue a joint effort with the rest of the G7 following China’s announcement of tough restrictions on rare earth exports to take effect from Nov 1, a bilateral EU-China approach would tackle the fundamental issues, one diplomatic source said.

"Generally speaking we would use all fora to negotiate, but fundamentally you negotiate bilaterally whilst maintaining good coordination with G7 partners,” the source said.

However the source noted that recent trade spats with China over EV exports, medical instruments and the now-dead Comprehensive Agreement on Investment have shown that the EU has no appetite for making significant trade concessions to China.  

"China has indicated some willingness to negotiate with different countries and might be ready to make exemptions, but it will want something in return," the source said, noting that its export restrictions partly reflect soaring domestic Chinese demand for rare earths as the country’s electric vehicle industry expands.

EV TARIFFS

A source following EU trade discussions said China might seek concessions on tariffs imposed on EVs. EU-China EV talks have been ongoing since the Commission imposed the tariffs in July 2024 and have focused on a tariff-rate quota solution, but the negotiations have been plagued by wide differences on what volumes and price levels might apply, the source noted.

"Yes, China has kept the issue alive all this time," the source said.

Any EV concessions would have to be measured, the diplomatic source said.

"That [tariff removal] would mean more and cheaper Chinese EVs on the EU market - that the EU is not interested in," the source said. "I am thinking more along the lines that the price level would be differentiated. There would be a certain volume with lower tariffs but for the bulk of imports China would agree to keep prices at the same level as where the EU tariff rate put it, so imports would be more controlled." 

XI-TRUMP SUMMIT

But big EU firms in the auto, defence and semiconductor sectors are seriously concerned by the export ban threat, which will potentially extend even to China's EV plants in Hungary and Spain and may also exclude Chinese technicians from working abroad, sources said, though they noted that much will ride on a potential meeting between China’s President Xi Jinping and U.S. President Donald Trump at the end of the month. (See MNI: Trump-Xi Meet Likely, But Any Deal Modest-China Advisors)

Alicia Garcia-Herrero of the Bruegel think tank said Chinese leverage on the rare earths issue is now so strong that it might actually force the EU to abandon EV tariffs altogether.  

"It would be a huge demonstration of weakness after [the heavily criticised trade-tariff deal] with the US. But there is probably nothing else they can do but accept," Garcia-Herrero said.