The European Union is preparing to cap imports of China-made hybrid vehicles to narrow its trade deficit with China, potentially widening a dispute over automotive trade.

The European Commission, which handles trade matters for the EU, is preparing safeguard measures following a surge in sales of China-made hybrids in Europe, Bloomberg reported on Wednesday, citing people familiar with the matter.

Safeguard measures allow the EU to restrict products from a sector following a surge in imports. One option is to use tariff-rate quotas, which impose a levy on imports above a certain volume, according to the report.

The proposed import restrictions would be time-limited, the people said. The report did not disclose specific quotas, tariff rates or an implementation date, and the plans could still change.

EU trade commissioner Maros Sefcovic will travel to Beijing later this week for talks with Chinese Commerce Minister Wang Wentao, and the outcome could influence the plans, Bloomberg said.

The commission intends to use hybrids as a test case and, if the measures prove successful, could extend them to other sectors where the bloc sees trade imbalances, according to the report.

The move signals that the EU is preparing tools to restrict imports itself after previously seeking voluntary export restraints from China.

The Financial Times reported on September 17 that the EU wanted China to voluntarily limit hybrid vehicle exports to the bloc or potentially face higher tariffs.

China's Commerce Ministry responded on September 18 that so-called voluntary export restraints seriously violated World Trade Organization (WTO) rules and ran counter to market principles and fair competition, expressing firm opposition.

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