China and the EU announced an agreement to resolve their years-long trade dispute over Chinese electric vehicles. The European Commission issued a document outlining how Chinese exporters can submit price undertakings, which it said must be “adequate to eliminate the injurious effects of the subsidies and provide an equivalent effect to duties”. It added that it would amend its existing regulations if it accepts such offers. To strengthen the proposals, the Commission encouraged exporters to include commitments such as annual shipment volumes and planned future investments in the EU. The EV dispute has been a major thorn in China-EU trade ties in recent years. Brussels opened its anti-subsidy investigation in October 2023, and concluded it a year later by imposing countervailing duties ranging from 7.8% to 35.3% over a five-year period. In response, Beijing launched probes into European cognac, dairy products and pork.
While the EU’s tariffs remain in place, they could be replaced with minimum import prices under the new scheme. In a separate statement, China’s Ministry of Commerce (MOFCOM) said “the progress fully reflects the spirit of dialogue and the outcomes of consultations between China and the EU. It shows that both China and the EU have the ability and willingness to properly resolve differences through dialogue and consultation under the framework of WTO rules and maintain the stability of automotive industrial and supply chains in China, the EU and the whole world,” the Ministry said. “This is conducive not only to ensuring the healthy development of China-EU economic and trade relations, but also to safeguarding the rules-based international trade order.”
In December, the EU launched a formal review of a price undertaking offer from Volkswagen’s Chinese joint venture – the first of its kind by a company seeking to bypass the EU’s tariffs on made-in-China EVs. That case played an important role in bringing about last week's announcement, as both sides accelerated negotiations following the proposal. The proposed move to swap tariffs for price floors marks a major development in the trade dispute, according to Alicia Garcia-Herrero, Chief Economist for the Asia-Pacific region at French investment bank Natixis. The China Chamber of Commerce to the European Union (CCCEU) said the progress marked a “soft landing” in the EV dispute and “a constructive step forward for China–EU trade and investment cooperation, as well as for the broader bilateral relationship”. “The consensus and arrangements reached will significantly strengthen business confidence, and create a more stable and predictable environment for Chinese electric vehicle manufacturers and related supply-chain companies investing and operating in Europe,” the Chamber said in a statement. It would also encourage further cooperation between China and the EU in areas such as market development and technological innovation, it added. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products echoed that view, saying a proper resolution of the EU’s anti-subsidy case was a “shared hope” for upstream and downstream players across the sector.
But Cui Hongjian, a former Chinese diplomat and the head of EU studies at Beijing Foreign Studies University, said major concessions to address trade tensions are unlikely in the near term as both sides face economic constraints along with uncertainties in relations with Washington. “At present, both sides are grappling with a certain lack of confidence in each other.” Garcia-Herrero at Natixis, meanwhile, warned the scheme could be bad news for Europe, undermining the credibility of EU tariffs and pushing up costs for European buyers. Its emphasis on increasing Chinese investment could deepen the bloc’s dependence on the country, she said, adding that it would allow Chinese producers to sell at higher profit margins without paying tariffs, the South China Morning Post reports.
The China Daily adds that though the EU intends to achieve the same outcome through price undertakings as by imposing tariffs, for Chinese automobile exporters, this means the portion equivalent to the duty is retained as their own revenue, effectively increasing their profit margins, said Sun Xiaohong, Secretary General of the Automotive Branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products. In October 2024, Brussels decided to impose tariffs for five years of up to 35.3% on imports of Chinese EVs on top of the standard 10% duty, following a probe into allegations of unfair subsidies in China’s EV industry. Chinese carmakers captured 12.8% of Europe’s electric-vehicle market in November, according to Dataforce.
Following a series of high-level meetings, Ji Xuehong, Director of an Automotive Industry Innovation Research Center at the North China University of Technology, said that “The next phase of development for intelligent and connected new energy vehicles will hinge on innovation rather than price competition. The industry is entering a period of opportunity in areas such as advanced materials, industrial software, autonomous driving, and solid-state batteries, while the electrification of heavy-duty trucks and the globalization of China’s NEV supply chain are also set to gather pace in the years to come.”
