Five days before a 50th anniversary summit in Beijing, the European Union’s campaign to unblock China’s rare earth export licensing backlog has become the defining test of a trade relationship strained by a record deficit and a month of tit-for-tat measures.
BRUSSELS, July 19: When European Commission President Ursula von der Leyen and European Council President Antonio Costa arrive in Beijing this coming week for a summit marking 50 years of diplomatic relations between the European Union and China, the anniversary rhetoric will be warm and the choreography elaborate. The substance, however, has been narrowed to a single overriding demand. According to Reuters, which cited two EU sources, the bloc’s diplomatic mission in China has been concentrating almost exclusively on one file in the run-up to the July 24 and 25 meetings: rare earths, and the Chinese export licensing system that has left European factories waiting on paperwork for months.
That licensing system is now the most closely watched customs queue in world trade. One EU diplomat told Reuters that of the several hundred rare earth export license applications submitted by European companies since Beijing tightened controls on rare earth alloys, mixtures and magnets, no more than half have shown any sign of being processed. Firms that do secure a license report a second bottleneck at the border, where approved shipments can still sit for days or weeks awaiting customs clearance before they move toward European production lines.
The final countdown to the summit has been accompanied by fresh signals that Brussels expects the problem to persist, and possibly to deepen. Berlin-based Table.Briefings reported on July 17 that the EU is preparing for the possibility of new Chinese export restrictions on rare earths from this autumn, and that an interagency crisis team has been tasked with mitigating the impact on European industry. That reporting, published just one week before the leaders meet, captures the mood in the European quarter: hope for a summit deliverable on licensing, paired with contingency planning in case the squeeze tightens instead.
A summit built around one commodity
The 2026 summit was conceived as a celebration of half a century of formal ties. Even its location tells a story about the current balance of leverage. It had been Brussels’ turn to host this year, but after China indicated that President Xi Jinping would not travel to the Belgian capital, the venue shifted to Beijing, Reuters reported. Von der Leyen and Costa are expected to press the rare earths case in separate meetings with Xi and with Premier Li Qiang, according to an EU official cited in the same reporting.
The European wish list is specific. Reuters reported that the EU wants China to grant rare earth licenses for longer periods, or to scrap the licensing requirement altogether for exports destined for the bloc. Brussels also wants Beijing to draw a clear line between the EU and the United States in the administration of its export controls. That demand gained urgency after China offered to prioritize civilian-use rare earth export licenses for American firms during talks in London earlier this year, a gesture that landed badly in European capitals still waiting for their own applications to clear.
“If China wants the EU equidistant between itself and the Trump administration, China’s trade regimes cannot equate the U.S. and Europe either,” Hosuk Lee-Makiyama, director of the Brussels-based trade think tank ECIPE, told Reuters after meeting senior Chinese officials in the run-up to the summit.
Expectations for headline outcomes remain deliberately low. Some EU officials told Reuters they did not anticipate major deals, with one commenting that China was “playing its cards very well.” In that official’s telling, Beijing had identified rare earths as a major European vulnerability early on and was waiting until the last minute before offering any concession, maximizing the value of whatever it eventually puts on the table in front of the cameras.
Inside the licensing logjam
The origins of the standoff trace to the spring of last year, when China expanded export controls on seven medium and heavy rare earth elements and on the high-performance magnets made from them, a move that followed the sweeping tariff announcements from Washington. The controls apply globally, but their weight falls disproportionately on Europe, which depends on China for the overwhelming bulk of its processed rare earths and finished magnets. The European Commission has put the bloc’s dependence on Chinese supply of these materials at roughly 98 percent, and automakers have warned publicly that restrictions on rare earth alloys, mixtures and magnets could trigger production delays across the continent.
Beijing has taken steps that, on paper, should have eased the pressure. China’s Ministry of Commerce said in May that a so-called green channel had been established to expedite rare earth license applications from EU firms. The numbers, however, have not matched the announcement. The backlog of unprocessed applications described by EU diplomats suggests the green channel is functioning more as a diplomatic gesture than as an administrative fast lane. A briefing from the European Parliament’s research service on China’s rare earth export restrictions has described a process that exporters experience as opaque and slow, with effective approval times that can stretch well beyond published deadlines.
Business groups on the ground in China confirm a picture of gradual, uneven improvement rather than resolution. “The situation is improving, although the percentage of cleared licences does vary. Additionally, even once the licence is given, delays can still be seen in customs clearances,” Adam Dunnett, secretary general of the European Union Chamber of Commerce in China, told Reuters.
For manufacturers, that double bottleneck, first the license and then the border, makes planning nearly impossible. Rare earth magnets are small, cheap components in absolute terms, but they are irreplaceable in electric motors, power steering systems, wind turbine generators, industrial robots, defense systems and consumer electronics. A missing magnet worth a few euros can idle an assembly line worth millions per day. European purchasing managers have responded by building inventories where they can, qualifying alternative suppliers where they exist, and in some cases redesigning products to reduce rare earth content, none of which offers relief on the timescale of the current backlog.
A new mechanism, tested early
The institutional answer to this recurring friction arrived on June 29, when Chinese Commerce Minister Wang Wentao and European Commission Executive Vice President Maros Sefcovic co-chaired the first ministerial meeting of the new China-EU Trade and Investment Consultation Mechanism in Brussels. The mechanism establishes four standing workstreams: trade and investment balance, export controls, intellectual property, and reform of the World Trade Organization. The two sides also agreed to set up a joint trade monitoring mechanism and to reconvene at ministerial level in the autumn, according to the joint statement carried by China’s Ministry of Commerce and analyzed by the industry publication Rare Earth Exchanges.
The joint statement was itself a milestone of sorts, the first such document between the two trading powers since 2019. On rare earths, the text noted that earlier discussions on critical minerals had produced what it called positive results, and committed both sides to deepen dialogue on export control frameworks, licensing policies and measures intended to preserve the stability of global industrial and supply chains. As Rare Earth Exchanges observed in its July 3 analysis, no actual policy changes or export concessions were announced; what changed is that rare earths are now permanently embedded in the bilateral ministerial agenda.
Beijing has moved quickly to advertise the mechanism’s momentum. At a July 2 press briefing reported by the Global Times, Ministry of Commerce spokesperson He Yadong said China had invited Sefcovic to visit China this autumn to co-chair the second meeting. He described the inaugural session as comprehensive, in-depth and constructive, and said the two sides had discussed what he framed as balanced expansion, rather than balanced contraction, of trade, focusing on cooperation in artificial intelligence and the green transition, services trade, and each side’s market access concerns. He also said the two sides had agreed on a new positioning for the relationship, namely that China and the EU should remain stable and balanced key trading partners.
Asked specifically about rare earths, He said the export control dialogue between the two sides had produced sound cooperation and that the EU had expressed appreciation for the outcomes achieved, adding that consultations would be strengthened under the mechanism’s export control pillar to safeguard global supply chain stability. Chinese analysts amplified the message. Zhang Jian, a vice president of the China Institutes of Contemporary International Relations, told the Global Times that the rapid invitation for a second ministerial meeting demonstrated China’s longstanding commitment to resolving trade disputes with the EU through dialogue, and that the first meeting’s achievements underscored both parties’ willingness to deescalate.
On the European side, Sefcovic has said he aims to convert dialogue into what he called tangible results before October, according to accounts of the Brussels meeting carried by Chinese and European media, and he has confirmed plans to travel to China in the autumn. The summit this week will show whether the new plumbing can deliver water: EU officials have made clear that movement on the licensing backlog is the deliverable by which Beijing’s talk of stable partnership will be judged.
The 360 billion euro backdrop
Beneath the rare earths dispute sits a structural imbalance that colors every conversation between Brussels and Beijing. According to Eurostat figures published in April, the EU exported 199.6 billion euros of goods to China in 2025 while importing 559.4 billion euros, producing a goods trade deficit of 359.8 billion euros. Exports fell 6.5 percent from 2024 while imports rose 6.4 percent, and the deficit widened by roughly 18 percent in a single year, a deterioration that European officials attribute in part to trade diversion as American tariffs pushed Chinese goods toward the European market.
The composition of the flows sharpens the concern. Electrical machinery and audiovisual equipment alone accounted for 164.9 billion euros of imports from China in 2025, nearly 30 percent of the total, followed by mechanical machinery at 106.5 billion euros, according to the same Eurostat release. European exports, by contrast, are concentrated in machinery, vehicles, precision instruments and pharmaceuticals, sectors where Chinese domestic competitors are advancing rapidly. For many in Brussels, the deficit is not merely a statistic but evidence that the relationship has drifted far from reciprocity, and it supplies the political fuel for the defensive measures the EU has rolled out in recent weeks.
Europe’s July offensive: steel, tyres and parcels
Whether by calendar coincidence or negotiating design, July has brought the most concentrated burst of EU trade defense activity aimed at China in years.
On July 1, the EU’s new Steel Overcapacity Regulation entered into application, replacing the safeguard regime that had governed steel imports since 2019 and expired on June 30. According to an analysis by the law firm Crowell and Moring, the new permanent instrument doubles the out-of-quota duty from 25 percent to 50 percent and cuts tariff-free import volumes across 26 categories of steel products by an average of 47 percent compared with the old quotas, while introducing melt-and-pour origin rules designed to prevent circumvention through third countries. China is not the only exporter affected, but Chinese overcapacity is the regulation’s animating concern.
On July 7, the Commission published a regulation imposing definitive anti-dumping duties of 4.3 percent to 45.3 percent on passenger car and light lorry tyres from China. The Directorate-General for Trade said the investigation found dumped Chinese imports were injuring an EU industry that employs more than 80,000 people across 14 member states. The market at stake is substantial: EU consumption of the covered tyres reached some 330 million units in 2024 in a market worth over 18 billion euros, with Chinese imports totaling almost 93 million units worth more than 2.5 billion euros, a 28 percent market share. A parallel anti-subsidy investigation covering the same products will conclude in December, raising the prospect of additional duties before year end.
The third front is e-commerce. Following the Council’s decision in November to abolish the 150 euro de minimis customs duty exemption, a transitional regime took effect on July 1 under which low-value parcels entering the EU face a flat duty charge of around 3 euros, with a further handling fee expected in November and full item-by-item customs treatment to follow once the EU’s new customs data systems are ready later in the decade, according to Commission announcements and logistics industry advisories. The measure lands squarely on Chinese platforms: Commission figures show some 4.6 billion parcels valued under 150 euros entered the EU in 2024, with more than 90 percent originating in China.
None of these measures formally references the summit, and each rests on its own legal machinery. But their cumulative message is unmistakable, and Beijing has read them as pressure. Chinese commentary carried by state media in recent weeks has urged the EU to abandon what it calls protectionist barriers and to think, in Zhang Jian’s phrase to the Global Times, in terms of the bigger picture.
Beijing’s counterpunches: pork and brandy
China’s own toolkit has been active for two years, largely in response to the EU’s countervailing duties of up to about 35 percent on Chinese electric vehicles, imposed after an anti-subsidy investigation that Beijing has never accepted as legitimate.
The most symbolically loaded response hit European spirits. China’s Ministry of Commerce concluded its anti-dumping investigation into EU brandy with final duties averaging just over 32 percent, while accepting minimum price undertakings from 34 European producers, including the major cognac houses Hennessy, Remy Martin and Martell, which are exempt from the duties as long as they sell at or above agreed floor prices. The arrangement, reported by Euronews and Chinese state media, converted a punitive tariff into a managed pricing regime, and it is widely viewed in Brussels as a template Beijing may offer in other sectors.
Pork has followed a similar arc. China imposed anti-dumping duties on EU pork and pork byproducts, with sampled companies facing rates between 4.9 percent and 19.8 percent, a blow aimed largely at Spain, the Netherlands and Denmark, before Caixin reported in December that some rates had been lowered on review. A parallel Chinese investigation into certain EU dairy products remains part of the backdrop. Meanwhile, negotiations over minimum price commitments for Chinese electric vehicles, which Beijing has linked to the resolution of the brandy file, grind on: China has said the talks are in their final stages, while EU officials, per Reuters, describe progress as limited.
The result is a relationship in which nearly every major product category, from sedans to spirits to sows, now carries some form of contingent duty, undertaking or pending investigation, and in which rare earths function as the ultimate escalation layer above them all.
Stakes for global supply chains
For importers and exporters far beyond Brussels and Beijing, the next week carries practical consequences.
European manufacturers that depend on Chinese magnets, from automotive suppliers to wind turbine builders and defense contractors, are watching for three specific outcomes: longer license validity periods, a general license framework for trusted European end users, and measurable acceleration of the backlog. Any of these would ease scheduling risk through the winter. None would change the underlying dependence, which is why the EU continues to press its Critical Raw Materials Act benchmarks calling for 10 percent of strategic raw material extraction, 40 percent of processing and 25 percent of recycling to take place inside the bloc by 2030, with no single third country supplying more than 65 percent of any strategic raw material. The G7’s June pledge to build alternative critical mineral supply chains points in the same direction, though analysts caution that new mines and separation plants operate on decade-long timelines, not summit timelines.
Exporters face their own map of risk. European agrifood and spirits producers remain exposed to Chinese undertakings and duties that can be tightened whenever the broader relationship sours. Steel traders shipping to Europe confront a 50 percent out-of-quota wall and sharply smaller duty-free volumes. Chinese e-commerce platforms and their logistics partners must reprice billions of parcels. Tyre exporters are already rerouting volumes to other markets, a displacement that trade lawyers expect to trigger safeguard and anti-dumping petitions elsewhere as diverted supply seeks new destinations.
Analysts see a larger pattern in all of this. Rare Earth Exchanges argued in its assessment of the new consultation mechanism that rare earths are no longer simply commodities but have become strategic negotiating instruments alongside tariffs, intellectual property and technology controls. Researchers at the European Council on Foreign Relations have gone further, urging the bloc not to blink in the face of what they describe as rare earth blackmail, and pointing to the EU’s untested anti-coercion instrument as the logical next step if licensing relief fails to materialize. That instrument would allow the EU to restrict Chinese access to public procurement and services markets, an escalation Brussels has so far been careful to keep holstered.
The road to July 24
The calendar now compresses everything into a handful of dates. The leaders meet in Beijing on July 24 and 25. The second ministerial meeting of the consultation mechanism is planned for the autumn in China, with Sefcovic aiming for tangible results before October. The anti-subsidy ruling on Chinese tyres lands in December. The next stage of the EU’s parcel regime arrives in November. And, if the July 17 reporting from Table.Briefings proves accurate, a possible new round of Chinese export restrictions could arrive in the autumn, which would test the new export control dialogue almost as soon as it convenes.
Fifty years after Brussels and Beijing first exchanged ambassadors, the relationship’s health is being measured not in communiques but in a queue of unprocessed license applications sitting in a Chinese ministry. If that queue shortens visibly in the days after the summit, the new consultation mechanism will have passed its first real test and both sides will claim a workable, if wary, equilibrium. If it does not, Europe’s crisis planners have already signaled what comes next: less talk of anniversary partnership, more stockpiles, more trade defense, and a faster march toward supply chains built to function without Chinese licenses at all.