EU-China in last gasp bid to avoid EV-driven trade war

Newswire

Beijing: China has suggested setting minimum prices for the electric vehicles (EVs) it ships to the European Union, a compromise bid to persuade the bloc to drop plans to impose 17-35.3% tariffs on Chinese EVs.

The European Commission planned to vote on the proposed tariffs on September 25 but delayed it without explanation. Nikkei reported that the vote will be held within the week beginning September 30.

The vote’s delay came after Chinese Minister of Commerce Wang Wentao met with European Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis in Brussels on September 19.

”Both sides agreed to intensify efforts to find an effective, enforceable and WTO-compatible solution to the battery EV case,” Dombrovskis said in a post on X on September 19. “This without prejudice to the EU investigation and its deadlines.”

He Yongqian, a Chinese Ministry of Commerce spokesperson, said in a media briefing on Thursday (September 26) that both China and the EU have clearly expressed political willingness to address disputes through consultations.

During the Wang-Dombrovskis talks, the two sides agreed to push forward negotiations on a “price commitment agreement“ and fully commit to achieving a mutually acceptable solution through amicable dialogue and consultations, she said.

“Currently, technical teams from both sides are actively discussing a flexible price commitment solution, following the direction set during the talks,” she said. “They are striving to reach a consensus on a solution framework before the final ruling.”

She stressed that China has the “utmost sincerity” to appropriately resolve disputes through dialogue and consultations, but at the same time, it is fully determined to safeguard the legitimate interests of Chinese companies.

Some Chinese commentators opined that China’s proposal of a “price commitment agreement” is an attractive deal for many EU members who want to avoid a full-blown trade war with China. However, they said, the offer may not be enough to change the EU’s tariff decision.

“Spain has said that China and the EU should not have a trade war while Germany’s stance against the EV tariffs has also become clearer,” Zheng Chunrong, director of the Center for European Studies at the School of Foreign Studies Tongji University, told Beijing Daily in an interview.

“However, such an opposition voice has not reached a level that can stop the tariffs,” he said. “It’s good that the EU continues its negotiations with China. But it’s hard to tell how things will develop.”

According to the EU’s qualified majority voting (QMV), at least 15 countries representing 65% of the EU population must block the proposed EV tariffs. If implemented, the tariffs will last for at least five years.

In a non-binding vote held in July, 12 out of 27 EU members voted for the EC’s decision to impose provisional tariffs on Chinese EVs. They included France, Spain and Italy. Four countries voted against it. The remaining 11 members, including Germany, abstained.

“It is very difficult to gather enough European countries to vote down the EC’s anti-subsidy probe results,” said Cui Fan, a professor at the School of International Trade and Economics of the University of International Business and Economics.

Cui said even if Spain, Italy and all the 11 abstaining countries join hands, they only represent 61.4% of the EU population and thus cannot vote down the tariffs.

In August, Chinese EV makers individually proposed to the EU to set minimum sale prices and sales quotas to prevent disruption of the bloc’s EV markets. However, the EU rejected all these offers.

“Our review focussed on whether these offers would eliminate the injurious effects of the subsidies identified in our investigations and whether these price undertakings could be effectively monitored and enforced,” a spokesperson of the EC said on September 12. “The Commission has concluded that none of the offers met these requirements.”

After this announcement, Wang traveled to Europe to make one last push to lobby the EC against the tariffs. It’s still unclear, however, whether his efforts will work to change EU minds.

One Hubei-based columnist opined that would be unreasonable for the EU to reject China’s “price commitment” proposal.

He said BYD has already priced its flagship Tang SUV at 72,000 euros (563,000 yuan) in Europe for 2025 while the same model was priced at about 200,000 yuan in China.

He said the Tang model may have to be priced at 800,000 yuan in the EU to match European EV maker rivals. He said forcing Chinese automakers to raise product prices will only hurt the interest of EU consumers.

Retaliatory trade moves are already in the pipeline. China’s MoC launched anti-dumping probes into EU pork imports in June and dairy imports in August.

Last year, China imported 2.6 billion euros (US$2.9 billion) worth of pork products and 1.76 billion euros of dairy products from the EU. At the same time, China exported 438,034 battery EVs worth 9.7 billion euros to the EU over the same period.

If a China-EU trade war breaks out, Chinese EV makers will pay more tariffs in absolute value than the EU’s pork and dairy product makers but they could conceivably more easily absorb the pain considering their higher margins.