Opinion | How China and Europe can best settle their EV tariff disputes

After applying provisional tariffs on Chinese electric vehicles (EVs) in July, the European Commission recently announced plans to impose definitive five-year import duties of up to 36 per cent that could come into force at the end of October.

In response, China has launched its own investigation into European subsidies for certain dairy products, notably cheese, milk and cream meant for human consumption. China’s Ministry of Commerce is also discussing higher tariffs on fuel-powered cars with large engines from the European Union.

Before that, China had already opened anti-subsidy investigations into French brandy and some pork products in January and filed a complaint with the World Trade Organization (WTO), arguing that the EU tariffs violated WTO rules and undermined global cooperation on climate change.

As the trade tensions intensify, the EU’s top diplomat Josep Borrell has warned that a trade war with China may be “unavoidable”. However, the window of opportunity is not closed yet.

Discussions appear to be are focused on the technical details as the European Commission has adjusted the tariff rates after consulting Chinese EV producers. Another popular idea is to encourage Chinese EV companies to invest and produce cars in the EU, which would not only help to reduce transport costs and avoid high tariffs but also create jobs and tax revenue for the local economies.