EU-China Team Up to Dodge U.S. EV Tariffs

The United States’ 100% tariffs on Chinese electric vehicles (EVs), implemented in 2024 under the Biden administration and reinforced by President-elect Donald Trump’s trade policies, have created a significant barrier for Chinese EV exports to the U.S. market. In response, the European Union (EU) and China are collaborating to circumvent these tariffs, ensuring Chinese EVs remain competitive in Europe while advancing mutual economic and environmental goals.

The U.S. Tariff Challenge and EU-China Collaboration

The U.S. tariffs, announced in May 2024, aim to protect American automakers from low-cost Chinese EVs, which benefit from substantial government subsidies, including $230 billion in state support from 2009 to 2023 (BBC). With Chinese EV imports to the U.S. negligible due to these tariffs, Europe has become the primary overseas market for China’s EV industry, accounting for 25% of EU EV sales in 2024 (Atlantic Council). However, the EU’s own tariffs of up to 45.3% on Chinese EVs, effective from October 30, 2024, complicate this dynamic, prompting joint EU-China efforts to mitigate trade barriers (Reuters).

Recent negotiations between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Maros Sefcovic, including a video link on June 12, 2025, and a face-to-face meeting in Paris on June 3, demonstrate a commitment to finding alternatives to tariffs ([Informative text]). These talks focus on minimum price commitments, local manufacturing investments, and enhanced trade cooperation, aiming to balance EU industry protection with China’s market access needs (Euronews).

Table: Key EU-China Negotiation Milestones (2024-2025)

Strategies to Bypass U.S. Tariffs

EU and Chinese officials are employing several strategies to ensure Chinese EVs reach European markets despite U.S. trade barriers:

Minimum Price Commitments

A key approach is negotiating minimum price floors for Chinese EVs in the EU, replacing punitive tariffs. In June 2025, European Parliament trade committee chairman Bernd Lange indicated that an agreement on minimum prices is close, addressing EU concerns about unfair subsidies while allowing Chinese EVs to remain competitive (Euronews). This strategy, discussed in depth during Wang and Sefcovic’s June meetings, aims to level the playing field without escalating trade tensions ([Informative text]).

• EU Perspective: Minimum prices protect European automakers like Volkswagen and Renault from being undercut by subsidized Chinese EVs, which are 20% cheaper on average (CSIS). However, the EU rejected earlier Chinese proposals in September 2024, citing difficulties in monitoring and enforcement (Euronews).

• Chinese Perspective: China benefits by maintaining access to the EU market, where its brands like BYD and Geely have grown from 1% in 2019 to 14.1% in 2024 (Reuters). Minimum prices allow Chinese firms to absorb costs through high profit margins, avoiding the U.S.’s prohibitive tariffs.

Local Manufacturing in Europe

Chinese automakers are investing in EU-based production to bypass both U.S. and EU tariffs. BYD is building a factory in Hungary, set to produce 150,000 EVs annually by 2026, while Chery has a joint venture in Spain’s Catalonia region (Euronews). Leapmotor, partnered with Stellantis, produces EVs in Poland, though production paused in March 2025 due to tariff-related pressures (Fortune).

• EU Perspective: Local manufacturing creates jobs and boosts economies, aligning with the EU’s goal of fostering green technology. Hungary and Spain benefit from investments, but German automakers like BMW oppose tariffs, fearing Chinese retaliation (Atlantic Council).

• Chinese Perspective: Producing in Europe shields Chinese firms from tariffs and enhances brand credibility. BYD’s Hungarian plant leverages the EU’s customs union with Turkey, granting duty-free access to both markets (AEB).

Leveraging Trade Agreements

China and the EU are exploring broader trade cooperation to offset U.S. tariffs. In June 2025, China proposed a “green channel” for EU rare-earth export approvals, addressing EU supply chain concerns ([Informative text]). This reciprocal gesture aims to ease tensions over China’s probes into EU brandy, pork, and dairy products, launched in retaliation to EU tariffs (Reuters).

• EU Perspective: Access to rare earths supports the EU’s EV battery production, critical for its 55% emissions reduction target by 2030 (Euronews). However, EU members like France and Germany remain divided, with France favoring tariffs and Germany advocating open markets (ECFR).

• Chinese Perspective: Trade concessions strengthen China’s position as a global EV leader, countering U.S. isolation efforts. China’s commerce ministry emphasized “deepening trade and investment” in June 2025 talks, signaling long-term strategic goals ([Informative text]).

Exploiting U.S. Tariff Chaos

Trump’s proposed 60% tariffs on Chinese goods and 10-20% on EU imports, announced in 2025, have spurred EU-China cooperation (Atlantic Council). X posts from April 2025 highlight China’s strategic pivot to the EU amid U.S. tariff chaos, with @allenanalysis noting, “Europe’s not backing down, they’re just switching tactics” (X post).

• EU Perspective: U.S. tariffs threaten EU exports, pushing Brussels to diversify trade partners. Closer ties with China mitigate economic risks, though aligning with Beijing could strain transatlantic relations (CSIS).

• Chinese Perspective: China capitalizes on U.S.-EU trade tensions, positioning itself as a reliable partner. Resumed talks in April 2025 aim to lower EU tariffs, enhancing China’s export dominance (Electrek).

Benefits for the EU and China

EU Benefits

• Affordable EVs for Climate Goals: Minimum price agreements ensure access to low-cost Chinese EVs, supporting the EU’s 2030 carbon neutrality target. Without tariffs, EV prices could rise, undermining consumer adoption (Transport & Environment).

• Economic Growth: Chinese investments in Hungary, Spain, and Poland create jobs and stimulate economies, offsetting domestic industry challenges (Wilson Center).

• Trade Diversification: Strengthened EU-China ties reduce reliance on the U.S., especially amid Trump’s tariff threats (Atlantic Council).

Chinese Benefits

• Market Access: Bypassing EU tariffs ensures China retains its 14.1% share of the EU EV market, projected to reach 15% by 2025 (Reuters). Local production further secures long-term growth.

• Global Leadership: Investments in Europe enhance China’s reputation as a tech leader, countering U.S. efforts to isolate it (CSIS).

• Economic Resilience: Diversifying export markets mitigates the impact of U.S. tariffs, with Europe absorbing China’s 3M-unit annual EV surplus (Reuters).

Challenges and Risks

EU Challenges

• Internal Divisions: The EU’s tariff vote in October 2024 was divisive, with Germany opposing and 12 members abstaining, reflecting economic dependencies on China (Reuters). This fragmentation complicates unified trade policies.

• Chinese Retaliation: China’s probes into EU brandy, pork, and dairy threaten exporters, particularly Spain (Euronews). A trade war could harm EU economies.

• U.S. Pressure: Aligning with China risks straining EU-U.S. relations, especially under a Trump administration pushing for decoupling from China (CSIS).

Chinese Challenges

• Profit Margin Pressure: Minimum prices and EU production increase costs, squeezing profit margins already strained by domestic price wars (BBC).

• WTO Scrutiny: China’s challenge to EU tariffs at the World Trade Organization could backfire if subsidies are deemed unfair (Guardian).

• Geopolitical Risks: Deepening EU ties may provoke U.S. retaliation, complicating China’s global trade strategy (Atlantic Council).

Deep Analysis: Strategic Implications

The EU-China collaboration reflects a pragmatic response to U.S. protectionism, but it carries broader implications:

• Geopolitical Realignment: By strengthening ties, the EU and China challenge U.S. dominance in global trade, potentially creating a multipolar economic order. However, the EU must balance this with transatlantic alliances, as noted in CSIS analyses (CSIS).

• Economic Security: Chinese EV factories in Europe raise national security concerns due to connected vehicle technologies, prompting the EU to consider investment screening mechanisms (Atlantic Council).

• Climate Impact: Affordable Chinese EVs accelerate the EU’s green transition, but high tariffs or trade wars could delay emissions reductions, as warned by Transport & Environment (Reuters).

X posts from June 2025, such as @financialjuice’s note on “in-depth” EU-China talks, underscore public interest in these negotiations, reflecting optimism about a resolution (X post).

Strategic negotiations

The EU and China are navigating U.S. tariffs on Chinese EVs through strategic negotiations, local manufacturing, and trade concessions. Minimum price commitments offer a viable alternative to tariffs, while Chinese investments in Europe create jobs and bypass trade barriers. Both sides benefit—Europe advances its climate and economic goals, and China secures market access and global influence—but challenges like EU divisions, Chinese retaliation, and U.S. pressure persist. As global trade tensions escalate, the EU-China partnership could reshape the EV industry and international relations, fostering a more sustainable and cooperative future.