The European Union has opened a narrow path for Chinese electric vehicle makers to sidestep punitive import duties. Detailed guidance shows how minimum prices could substitute for tariffs that have caused trade tensions between the two blocs since 2024.
But why does Brussels want to hand over its extra income from punitive tariffs to the Chinese carmakers?
The guidance issued this week by the European Commission is the most concrete step yet toward replacing the much-debated duties on China-made battery electric vehicles (also applicable to models produced by Western carmakers in the region) with so-called punitive tariffs.
Under the new system, manufacturers can apply to sell cars in Europe at prices above a defined floor price, rather than paying tariffs that, in some cases, exceed 35 percent on top of the standard 10 percent import duty.
A concession?
This outcome is what Chinese officials have lobbied for from the start. On paper, the change looks like a concession. But in practice, the guidance bundles rules that are tight enough to reduce the commercial impact and “protect the European marketplace” as it is officially announced.
Straightforward it is not. Each vehicle model and configuration coming in from China requires its own minimum import price, calculated either by adding the original duty margin to past export prices or by matching the sales price of comparable, unsubsidised electric vehicles built in Europe. Whichever route is preferred, the price levels created by the tariffs will be more or less preserved.
Neutral market impact
That was to be expected. The Commission has repeated time and again that any alternative must neutralise what it sees as the market effects of China’s state support for electric vehicles.
Officials stress that applications will be judged on a case-by-case basis and can be rejected if they fail to offset those effects or create risks of cross-compensation, such as raising EV prices while undercutting competitors through other products or services.
China’s Ministry of Commerce has portrayed the guidance as a breakthrough rooted in dialogue and World Trade Organization rules. The tone contrasts sharply with Beijing’s earlier objections, stating that the tariffs are politically driven.
But Chinese car groups argue that the mechanism does not automatically guarantee relief. Approval depends on Brussels’ assessment, and there is no immediate suspension of all duties.
Softening the trade fight
Major Chinese brands, including BYD, Geely, and SAIC, remain subject to the existing tariffs unless and until a price undertaking is approved. The Commission has acknowledged receiving at least one serious proposal tied to a single model, but officials have played down expectations of a rapid resolution.
For European policymakers, the shift offers a way to soften an increasingly trade fight with China while addressing internal upheaval. The original tariffs, imposed after an anti-subsidy investigation concluded in late 2024, split member states and exposed tensions.
Beijing filed for an official protest at the World Trade Organization, while Germany was notably opposed, as some of its carmakers have a foothold in China. It’s the place where BMW builds the electric Mini, or where Volkswagen-owned Cupra manufactures the Tavascan.
On the other hand, while the punitive tariffs have done little to lift prices of Chinese EVs – most of the car brands absorbed the excess levies – they did provide the European Union with extra income. The price floors unwind these profits.
Whether minimum prices can deliver fair competition without becoming an administrative maze remains uncertain. What is clear is that the EU is not retreating from its assessment of China’s subsidies. It is simply changing the instrument, testing whether control by contract can succeed in restoring more stable trade relations with China, now that the United States continues to showcase unreliability and unpredictability in its economic policies.
