The European Union China have agreed on a broad initial trade deal following two days of talks aimed at calming escalating tensions over trade imbalances, European Commissioner for Trade Maros Sefcovic said Friday.

Neither side provided clear details on the preliminary agreement, but Sefcovic said it includes lower tariffs for some European goods entering China as well as measures to stabilize rare earth supply chains.

Under the emerging framework, the deal could cut up to 50% of Chinese electric and plug-in hybrid vehicle imports to the EU and could lower tariffs on products benefiting "almost every" EU nation, according to the EU's top trade envoy. The agreement would still require approval from leaders across the 27-nation bloc.

"By this step we are actually preventing several millions of car exports from China to the European Union," Sefcovic said.

The two sides were seeking to resolve key factors behind China's growing trade surplus with the EU, which hit 360 billion euros ($403 billion) last year.

China's Commerce Ministry posted online that Chinese Commerce Minister Wang Wentao expressed concerns about the EU's recent restrictive measures, saying that China is not the root of the EU's problems but a partner in solving them.

Sigrid de Vries, head of the European Automobile Manufacturers' Association, said the deal appears to avert further instability in the EU and "can help facilitate the transition to a new era of Chinese presence in the European market in an orderly way and this is in the long-term interests of all parties."

Sefcovic said he will brief EU leaders meeting in Brussels next week and seek their approval.

"They would have to see that this is convincing enough to take the other steps," he said. "We are in a situation that they (China) could put under the threat whole sectors in the European industry, literally thousands of jobs and the public opinion and the leaders clearly expect very fast from our side."

Rare earths and tariff concessions

Sefcovic also said both sides reached understandings to further facilitate China's export licensing for rare earths and permanent magnets, as well as to improve access to the Chinese market for a range of EU products through lower most-favored-nation tariffs — the baseline duties that World Trade Organization members apply to one another. The concessions would cover car parts, olive oil and footwear, together worth almost 4 billion euros (about $4.5 billion) in current export value.

Rare earths and permanent magnets are used in products ranging from electric vehicles to electronics and industrial equipment, making stable supplies of the materials a priority for European manufacturers.

The two sides will meet next by video in January and then in person in March.

Outstanding frictions

China has been pushing for the EU to stop blocking Chinese imports of advanced computer chipmaking machines, restrictions imposed on national security grounds at Washington's behest.

Earlier, Sefcovic had said the talks this week were the culmination of three months of intensive work. He had set an October deadline for meaningful results on trade rebalancing.

Earlier in the week, the Chinese Commerce Ministry issued a statement urging the EU to avoid protectionist measures, warning that such moves could backfire.

Trade tensions have grown in recent months, with both sides imposing or considering curbs on each other's imports. The EU has moved to limit imports of Chinese-made electric vehicles and EV batteries and enacted measures to protect the European steel industry. It is also limiting duty-free imports of e-commerce small parcels, a step aimed essentially at Chinese fast fashion firms.

Last week, China launched an anti-dumping investigation — a probe that can lead to import duties if goods are found to be sold at unfairly low prices — into imports from the EU of p-nitrotoluene, a chemical compound used in dyes and pharmaceuticals. Chinese officials and businesses have raised concerns over reports that some EU members are pushing for new measures to protect local industries.

'China shock 2.0'

Worries over surging Chinese exports to Europe and other parts of the world — what some are calling a China shock 2.0 — have deepened as the United States, especially since U.S. President Donald Trump returned to the White House, has raised tariffs and enacted other measures to try to reduce its own huge trade deficit with Beijing. The label echoes the original "China shock," the wave of Chinese imports that followed Beijing's entry into the World Trade Organization in 2001.

Despite the backlash from some of its trading partners, China's global trade surplus hit $1.2 trillion in 2025 and is forecast to surpass $1 trillion again this year. The EU's trade deficit with China widened to 103.3 billion euros (about $116 billion) in the second quarter, as imports rose to 153.6 billion euros ($172 billion), while European exports to China climbed to 50.3 billion euros ($56 billion), according to EU statistics.

Tensions have also spilled beyond trade policy. On Wednesday, Germany blocked the sale of a major logistics firm in the port of Hamburg to Cosco, the state-owned Chinese shipping behemoth, over security concerns.

"As Europe's largest economy, Germany welcomes foreign investment. At the same time, some investments can endanger the country's security," the German economic ministry said in a statement. "The acquisition would have deepened dependencies and jeopardized the resilience of supply chains in Germany and the EU."

This story was originally featured on Fortune.com.