(Photo by Carsten Koall/Getty Images)
The growing friction between China and the European Union over electric vehicles has reached a critical point. On 4 October, the European Commission secured the backing needed from member states to impose countervailing duties on imports of Chinese-made battery electric vehicles. The decision, however, comes with a notable divide within the EU.
A surprising number of countries, many of which have been working to deepen relations with China, abstained from the vote, casting a shadow over the bloc’s united stance. At the heart of this dispute are accusations from the European Commission that Chinese electric vehicles benefit from government subsidies, giving them an unfair competitive edge over EU car manufacturers.
Beijing has been consistently rejecting these claims, maintaining that its electric vehicle industry has not received such advantages. As expected, China’s response has been direct and sharp, condemning the EU’s move as an “unfair, illegal, and unreasonable protectionist practice”.
This escalating tension reflects broader problems between China and Europe, as protectionist measures emerge in response to China’s rapid advancements in key sectors such as electric vehicles. While the EU frames the tariffs as “necessary to safeguard” its carmakers, China views them as a misguided reaction that undermines the principles of free trade. The coming months will test the resilience of China-EU relations, as both sides grapple with the implications of this evolving economic rift.
The European Commission’s move to impose tariffs on Chinese-made electric vehicles has exposed deep rifts in the EU. Germany, Europe’s leading car manufacturing nation, voted against the step. It’s not hard to see why. German vehicle giants have invested billions into China, reaping huge profits in return. For German Chancellor Olaf Scholz, this puts him at odds with Ursula von der Leyen, the European Commission president.
Germany’s vehicle industry is more than just a national asset; it’s the backbone of the economy, accounting for nearly a quarter of the country’s total domestic industry revenue in 2022. The tariffs are a direct hit to Germany’s national interests, affecting not only the carmakers but also the workers and families who rely on this critical sector.
The European Commission appears unmoved, stating that the vote is just one more step in its ongoing anti-subsidy investigation. But for Germany, the issue is more complex than just trade policy. It’s about balancing economic realities, global partnerships and the future of its prized vehicle industry — all while managing the shifting political winds in the EU.
The European Union’s vehicle industry, employing 2.5 million directly and 10.3 million indirectly, finds itself at a crossroads as the market for electric vehicles shifts. Chinese-made EVs now account for 19% of Europe’s market, with predictions of that figure rising to 25% by year’s end.
But if the current negotiations fail, the EU is set to impose additional tariffs on Chinese EVs, already subject to a 10% levy, starting on 31 October and lasting for up to five years.
For China, Europe’s EV market is far more consequential than the US, where Washington’s recent decision to impose a 100% tariff on Chinese-made EVs is politically irksome but economically less harmful. In Europe, however, Chinese vehicle manufacturers have made significant inroads, a reality the European Commission aims to curtail with its proposed tariffs. The EU’s manufacturers have lagged behind in the transition to EVs, and the European Commission’s move to protect its domestic industry raises broader questions about trade fairness.
Rather than resorting to protectionist measures that limit competition, EU governments would be better served by focusing on accelerating their own EV development in line with World Trade Organisation rules. Fostering innovation, not restriction, is what will ensure the long-term competitiveness of European automakers.
In such a complex international environment, both China and the EU should prioritise the needs of their businesses and resolve crises through dialogue. Strengthening international cooperation, while advocating for multilateralism and better global governance, is essential for addressing shared problems. After all, the future of global stability hinges on mutual collaboration, not division. Trade disputes are best addressed through objective market data and careful, scientific evaluation — not through threats of political retaliation or diplomatic coercion. The path forward should be grounded in equal consultation and dialogue.
The European Union, instead of turning to protectionist measures or politically charged decisions, should confront the dumping practices in its own industries and address the unfair tactics employed by certain companies. China has adopted a pragmatic approach, urging the EU to return to the principles of fair competition. By doing so, both sides can reaffirm their commitment to mutual cooperation and pursue the shared goal of a win-win outcome.
After all, in today’s globalised market, sustainable success is achieved through collaboration, not isolation or confrontation.
Dr Imran Khalid is a freelance columnist on international affairs based in Karachi, Pakistan.