After the European Union (EU) set to impose new tariffs of up to 38.1% on China’s electric vehicles (EVs), both nations have shifted gears and have agreed to enter into talks regarding this. This agreement comes amidst rising trade tensions and follows a visit to China by German Economy Minister Robert Habeck.

The breakthrough was announced after a video conference between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Valdis Dombrovskis, where both sides described the call as “candid and constructive,” signaling a willingness to engage in dialogue to address the situation.

In terms of Habeck’s meeting with Chinese authorities in China, he emphasized that these were not punitive tariffs but rather measures aimed at leveling the playing field stating, “One has to be very careful now, this is a first step and many more will be necessary,” Habeck said. “But at least this is a first step that was not possible before. That’s why tonight is a good evening if we want to try to maintain a level playing field and avoid a tariff war.”

Moreover, Habeck also added that the EU’s approach differs from countries such as the United States (U.S.), which recently imposed a quadrupling of tariffs on Chinese EVs. He also spotlighted the EU’s concerns about fair competition, stating, “Proven subsidies that are intended to increase the export advantages of companies can’t be accepted.”

Notably, a recent study by the Center for Strategic and International Studies (CSIS) estimates that the Chinese government has invested at least $230.8 billion in developing its EV industry since 2009, raising concerns about its impact on the EV market.

While both sides have agreed to start consultations, EU officials stressed that any negotiated outcome must effectively address the issue of “injurious subsidization.” The European Commission spokesperson stated that talks would continue at all levels in the coming weeks.

The outcome of these negotiations could have major implications for the global EV market and trade relations between China and the EU. As the automotive landscape is seeing a transition towards electrification, finding a balance between these important discussions during the negotiations will determine the market for global automakers in the EV space.

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