China and the EU Agree to Intensify Tariff Negotiations

The trade representatives of the European Union and China agreed to intensify their discussions to prevent the current tariffs on electric cars from the Asian country from becoming permanent through a vote that is expected to occur next week.

Valdis Dombrovskis, the EU Trade Commissioner, stated that he had a "productive meeting" with his counterpart minister, Wang Wentao, and that they planned to "continue negotiations without prejudice to the EU's investigation or its deadlines."

Brussels was firm with China and indicated that it would continue its investigation into subsidies for the automotive industry by Xi Jinping's government. "Both parties have agreed to review prices," said Olof Gill, a spokesperson for the Commission.

For its part, the Chinese Ministry of Commerce stated in a communiqué that both blocs would continue seeking an acceptable solution for both. Additionally, it noted that European tariffs would be met with "necessary measures" on their part.

China had previously offered a price and export volume agreement, a mechanism used to control the trade balance; however, the Commission noted that the proposed conditions were not acceptable.

The Chinese minister is touring various member states to prevent the vote that would make current provisional tariffs permanent. To achieve this, a qualified majority against it is required, that is, two-thirds (15) of the countries that make up the EU.

In July, the European Commission imposed tariffs of up to 36% on electric vehicles from China, in addition to the 10% already applied to all automotive products from the country. If definitively approved, Asian manufacturers could face these rates for years.

The Von der Leyen government has repeatedly stated that any solution reached must align with World Trade Organization rules and consider the impact on competitiveness of government subsidies to the automotive industry by Xi Jinping's government.

If China takes retaliatory measures, German manufacturers would be most affected, as they sell a third of their products in China, especially premium brands highly valued by Beijing's elite. While Audi, BMW, and Mercedes all have factories in China, there are models that come from Germany solely as imports, which also applies to Porsche.

Reaching an agreement would allow Chinese brands access to one of the most lucrative markets for their electric cars. After a brutal price war in their country, their sales margins have significantly decreased, something Europe can alleviate.

While Italy has shown support for definitively imposing tariffs, Spain and Germany have positioned themselves against it. On one hand, Chery Group will manufacture its vehicles in Barcelona—a decision that has been postponed for a year—and on the other hand, China has begun an 'antidumping' investigation into domestic pork products. Faced with this situation, Prime Minister Pedro Sánchez stated that they should "reconsider the tariffs."