Growing trade tensions between China and the European Union over tariffs on electric vehicles (EVs) are setting the stage for a broader conflict, but neither side appears eager to escalate the situation. Despite stalled talks over the high-stakes EV dispute, the EU is following a long-term diplomatic approach, hoping to contain the fallout and avoid a costly trade war.
While the US election will likely lead to further American restrictions on Chinese goods, European negotiators are proceeding more cautiously, focusing on diplomacy rather than immediate confrontation. Their goal: to build a more stable relationship with Beijing amid rising global tensions, even if this does not immediately resolve the issue of tariffs on EVs.
Some EU member countries are even exploiting the dispute to their advantage, using it to attract new Chinese investment outside of Brussels’ broader negotiations with Beijing. France, for example, sent a junior trade minister to Shanghai this week and holds the title of “Country of Honor” at China’s annual import fair, underscoring its interest in strengthening trade ties despite retaliatory tariffs of China on French brandy.
China, meanwhile, faces growing pressure to carefully manage its relationship with the EU. According to Bo Zhengyuan, a Shanghai-based partner at consultancy Plenum, “China does not want this to significantly damage the EU-China relationship, especially with the potential changes in the US after their elections.”
The growing tariff dispute over electric cars reached a tipping point last week when the EU implemented tariffs of up to 45.3% on Chinese electric car imports, a decision that exposed divisions within the bloc and has prompted a swift retaliation from Beijing. The EU claims China’s state-subsidised car industry undermines fair competition, while China has responded by launching investigations into European pork and dairy products, and imposed further restrictions on brandy imports.
In addition to these retaliatory measures, a deeper negotiation process is taking place, as Beijing recently hosted several official EU visits aimed at promoting dialogue and mutual understanding. Observers see this move as an attempt to maintain diplomacy and avoid further tariff escalations.
With the global trade environment continuing to heat up, the EU’s long-term strategy with China could set the tone for future trade dynamics.
