China Pledges Continued Rare Earth Exports to Europe as EU Trade Deal Leaves Deficit Concerns Unresolved

China signaled it will continue approving rare earth export licenses to Europe regardless of what happens to the U.S.-China trade truce, which faces a January expiration. Chinese Commerce Ministry spokesperson He Yadong told CNBC that Beijing intends to keep rare earth supplies flowing to European buyers, a commitment that follows a broader preliminary trade deal struck October 10 between EU Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao in Beijing.

That preliminary deal, reached after two days of talks, includes measures to stabilize rare earth supply chains, lower tariffs on some European goods entering China, and a commitment by Beijing to halve Chinese electric and plug-in hybrid vehicle exports to the bloc, a reduction that could reach 50%. European automaker associations welcomed the agreement, though analysts noted the pledge covers projected export growth over four years, meaning Chinese vehicle sales in Europe could still rise in absolute terms. The deal also still requires formal Brussels approval.

Despite the diplomatic progress, analysts and Barron's cautioned that the deal does not resolve the structural trade imbalance. China's exports surged 36.3% year-over-year in September, pushing its annual trade surplus toward a new record of roughly $938 billion. The EU-China deficit has been a flashpoint, with Germany and France previously urging Brussels to develop last-resort instruments to counter Chinese industrial overcapacity.

For Chinese automakers, Europe has become essential. With domestic margins squeezed and the U.S. market largely closed by tariffs, brands including those under the Geely umbrella are prioritizing international expansion, particularly into Europe, as a primary path to financial survival. The Wall Street Journal noted that Chinese automakers are pressing international growth strategies even as market access remains constrained in several regions.