Beijing warns of retaliation if Europe imposes curbs on Chinese businesses

BEIJING — China's commerce ministry has sent a strong warning to the European Union ahead of expected high-level talks in Beijing next week.

China will "respond firmly" if the EU introduces restrictions on Chinese businesses or products, the Chinese commerce ministry said in a statement late Tuesday, according to a CNBC translation of Mandarin.

The ministry said such actions, while China and the EU are engaged in trade talks, would "seriously undermine mutual trust" and "disrupt" the negotiations.

China and the EU have been engaged in trade talks this summer as Europe wants to reduce its record trade deficit with China by October. EU Trade Commissioner Maroš Šefčovič had warned in an interview with Euronews this week that Beijing must deliver "concrete results" by October or face "harsher measures." He is expected to visit Beijing next week.

Earlier this week, Rhodium Group's Noah Barkin said Europe was considering measures to shut China out of the bloc.

Citing European officials, he said Germany and France are finalizing a joint paper that calls on the European Commission to speed up development of a tool that one official described as allowing Brussels "to cut China off from the European market within 24 hours."

Barkin said the measures could mirror the U.S. Section 301 tariff approach. China's commerce ministry statement said it was responding to Europe's consideration of "301"-style tools.

While the Association of Southeast Asian Nations surpassed the EU in 2020 to become China's biggest goods trading partner, the EU's trade deficit with China is the largest in the world, recently surpassing the U.S. That's according to China Customs data accessed through Wind Information.

When including services, the EU said it was China's top trading partner, with combined trade of 880 billion euros, or nearly $1 trillion, last year.