EU Wants China to Fix Rare Earths Issue Before July Summit

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(Bloomberg) — The European Union wants China to resolve the export issue around rare earth magnets before a meeting of their leaders next month, according to the bloc’s top envoy to Beijing. 

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Europe is asking China to “understand the fear and concerns” felt by European companies due to China’s new controls on magnets, Ambassador Jorge Toledo told Chinese Foreign Minister Wang Yi. The shortage is affecting European businesses “very very badly,” he said on Wednesday in Beijing, adding that Europe expects China to “fix this thing even before the summit.” 

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Chinese exports of permanent magnets have slumped in recent months after Beijing imposed permit requirements for shipments of some rare earths, hobbling global supply chains of cars and other high-tech products. The impact looks especially acute in Europe, with shortages persisting even though China has promised to speed up approvals.

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Overall, trade and economic relations are “not very bright,” Toledo said, noting a high-level dialogue on these issues had been canceled and little progress has been made since 2023. “We only want a level playing field and we think, sincerely, that we don’t have it and that it has gotten worse in the last years,” he said, noting that China’s economy has grown 40% since 2017 but EU exports to China had fallen by 30%. 

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China’s top diplomat will travel to Brussels next week for a meeting with EU foreign policy chief Kaja Kallas, while European Commission President Ursula von der Leyen and European Council President Antonio Costa plan to come to China for the summit on 24-25 July, Toledo said.   

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Trade Tensions

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Beijing has been taking steps to improve ties with Brussels as relations with the US deteriorate, but trade has become an increasingly difficult topic between the two sides. 

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Holding up a magnet as she spoke, Von der Leyen earlier this month in Canada attacked China for “weaponizing” its monopoly in certain supply chains as a bargaining chip to undermine competitors. She also accused China of flooding “global markets with subsidized overcapacity that its own market cannot absorb” as the economy slows. 

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China’s trade surplus with the EU jumped almost 23% in the first five months of this year, hitting a record $117 billion. 

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The EU has been gradually stepping up its use of trade sanctions against China, imposing tariffs in 2024 on Chinese electric vehicles to compensate for what it said were Beijing’s unfair subsidies. It has also restricted Chinese companies’ access to the EU’s medical device sector over concerns European companies face hurdles accessing the Chinese market, Bloomberg previously reported. 

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For its part, Beijing has started investigations into European brandy and pork to see whether European exporters are dumping their products in China. Deadlines for sharing the results of those probes have been extended, giving China leverage to impose or threaten to impose tariffs if talks don’t go well.

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(Updates with details around July summit.)

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