China's Strategic Moves on EU EV Tariffs Yield Results

As a crucial vote on European Union (EU) duties on China-made electric vehicles (EVs) approaches, Beijing has employed a calculated carrot-and-stick strategy toward the 27-member bloc, threatening trade retaliation while simultaneously engaging key EU states in one-on-one negotiations over deals and investments.

The potential counter-tariffs could hit EU nations like Spain, France, and Italy—which have supported the proposed EV duties—particularly hard, with key exports such as pork, dairy, and brandy to the world's second-largest economy at risk. In contrast, EU members like Germany, Finland, and Sweden that have not pushed for the tariffs would face less impact, as they have limited exposure to these export categories targeted by China.

China’s strategy seems to be gaining traction. Spanish Prime Minister Pedro Sanchez recently concluded a visit to China, where he was photographed in a Chinese EV, calling the experience an “honor.” Following his visit, Sanchez unexpectedly called on the EU to reconsider its stance on the EV tariffs. A Spanish government source noted that the delegation felt “Spain is more important now” and hinted that an agreement on pork tariffs was close.

China has also employed incentives as part of its strategy. A Chinese company agreed to build a $1 billion plant in Spain to produce machinery for hydrogen production, signaling support for Spain’s green energy ambitions.

By targeting exports like pork and dairy, China maximizes the domestic political costs for EU countries voting in favor of the EV tariffs, says Beijing-based economist Mei Xinyu. These agricultural sectors often hold significant sway in EU politics. In 2023, the EU’s exports of pork, dairy, and brandy to China totaled approximately $10 billion, although not all products in these categories would face tariffs. Overall, the EU's exports to China exceeded $280 billion last year.

While China does not seek a trade war with the EU—particularly after the sting of US tariffs imposed during the Trump era—it has made it clear it will retaliate if Brussels moves forward with the proposed EV tariffs of up to 35.3%. In 2023, China exported 656,000 EV units to Europe, a 38% increase from the previous year, accounting for over 40% of all EVs shipped out of China.

Chinese Commerce Minister Wang Wentao is set to visit Europe next week to meet with EU trade chief Valdis Dombrovskis, as well as Italy, a country that supports the tariffs while also seeking Chinese investment in its EV production capacity.

For China to block the tariffs, it needs at least 15 EU members representing 65% of the EU population to oppose them in the October vote. However, EU positions remain diverse. Some smaller states are staying neutral, while others prioritize maintaining strong EU ties over relations with China. For instance, an Irish trade representative noted that Ireland, which has limited exports to China, would likely prioritize its EU relationships.

China's approach contrasts starkly with its tactics toward Canada. Following Canada’s imposition of a 100% tariff on Chinese EVs in August, Beijing retaliated with an investigation into Canadian rapeseed exports—without prior public warning. Unlike with the EU, China gave no signals of willingness to negotiate with Ottawa.

While China has taken a hard line with Canada, it remains open to negotiation with the EU. “With Canada, they went straight for shock and awe,” explained Even Pay, an analyst at Trivium China specializing in agriculture, highlighting Beijing's differing strategies with different trading partners.