EU membership would end Iceland China free trade deal

An opinion article published by Morgunblaðið argues that Iceland would lose significant trading opportunities with China if it joined the European Union.

The article was submitted by the Iceland-China Chamber of Commerce, whose stated aim is to strengthen and maintain business ties between the two countries, as well as educational and cultural links. The chamber has about 80 member companies, most of which already trade with China through imports or exports.

Free trade agreement would be cancelled

The chamber says its representatives may not all share the same view ahead of Iceland’s referendum on EU membership on 29 August. However, it argues that the organisation has both the right and the duty to present what it describes as facts about the effect EU membership would have on Icelandic companies and trade with China.

Iceland’s free trade agreement with China entered into force in 2014. The article says the agreement would be cancelled if Iceland joined the EU, as would other free trade agreements made by Iceland as an independent and sovereign state.

According to the article, the agreement has significantly increased trade between the two countries. Businesses and households have benefited from tariff-free imports and exports to China. China may now be Iceland’s second-largest trading partner, it says, adding that trade between the countries increased in 2025 while trade with EU countries declined.

The article also argues that EU membership would end the recent trend of Icelanders buying goods directly from China instead of purchasing the same products at considerably higher prices through intermediaries in Europe or the United States.

Direct flights could boost exports

The planned launch of direct flights between Keflavík and Beijing on 26 October would create greater opportunities for tariff-free exports to China, including fresh seafood and farmed fish, according to the article.

It says those opportunities would be lost if Iceland joined the EU. The tariff-free access provided by the agreement gives Icelandic exporters easier entry to the Chinese market and a competitive advantage over countries without a free trade agreement, the chamber argues.

The article says the arrangement could also help Iceland reduce its persistent deficit in goods trade.

Higher import costs under EU tariffs

Goods could still be imported from China after potential EU membership, the article says, but they would become considerably more expensive because the EU does not have a free trade agreement with China comparable to Iceland’s.

Iceland would instead be subject to the EU’s tariff and fee rules, which the article argues would raise prices and increase inflation. It cites EU tariffs of between 17% and 35% on cars from China, and tariffs of between 12% and 70% on clothing.

The article further argues that Iceland would be subject to the EU’s international trade rules, including various technical barriers, restrictions and bans affecting suppliers and goods. It says these measures are intended to protect manufacturers in mainland Europe and would reduce Iceland’s scope for independence and self-determination in such matters.