On EU EV Tariffs, China Adopts a Divide-and-Conquer Strategy

Spanish Prime Minister Pedro Sanchez made a four-day official visit to China from September 8 to 11. As is common during European leaders’ trips to China, there was a strong economic focus, with Sanchez attending not only talks with Chinese President Xi Jinping but a China-Spain Business Advisory Council Meeting and a China-Spain Business Forum.

It’s no coincidence that, after these engagements, Sanchez urged the European Union to “reconsider” the imposition of tariffs on Chinese electric vehicles. “I have to be blunt and frank with you that we need to reconsider – all of us, not only member states but also the Commission – our position towards this movement,” Sanchez told reporters from China, on the final day of his trip.

“We don’t need another… trade war,” he added.

In June, the European Commission decided to increase tariffs on Chinese-made EVs to 35.3 percent (although companies that “cooperated in the investigation,” such as BYD and Geely, will see lower tariff rates of under 20 percent). In doing so, the Commission accused China of oversupply, essentially glutting the market with Chinese EVs through “unfair subsidization” from the Chinese government.

However, the tariffs are provisional, subject to a final vote from the 27 member states of the European Union. The Commission’s decision could be overturned if 15 EU members, representing at least 65 percent of the EU population, vote against the tariffs.

The clock is ticking: on October 30, the decision will become final.

Before then, China is pulling out all the stops to try to stop the tariffs, which Beijing has called “discriminatory” and a “protectionist approach.” In China, the narrative is that Chinese EVs are so superior, in price and function, that Western governments have to resort to “unfair market barriers” to keep them out.

It’s a fraught issue for Beijing, which sees EVs and EV batteries as the new “pillars” for its faltering economy. Yet China’s domestic sales of EVs are slowing, forcing companies to pin their hopes on exports for future growth. If the EU effectively scuppers Chinese exports to the region, it will cut off a huge potential market – another blow after the United States has already slapped Chinese EVs with 100 percent tariffs.

At the same time, the Chinese government has no intention of ending its practice of generous subsidies – at both the central and local level – to EV companies. State media vowed that Beijing would not “yield an inch” on the question of EV tariffs.

That brings us back to Sanchez’s visit. Even while nominally attempting to negotiate a trade solution with the European Commission, China seems to be hoping it can convince enough individual European governments to vote against the measure.

China planted the seeds of this divide-and-conquer strategy back in June 2024, when the European Commission had just announced the EV tariffs. Just days later, China’s Commerce Ministry announced its own retaliatory tariffs – not on European automobiles, as first threatened, but on pork products. Echoing the EU’s own complaints, China is accusing European pork producers of enjoying overly generous government subsidies.

As the Associated Press reported at the time, EU pork exports to China amounted to “2.5 billion euros ($2.6 billion) last year. Almost half of that total came from Spain.”

In that context, it’s not surprising that Sanchez has become the most outspoken opponent of the EU tariffs on Chinese EVs, despite his government previously supporting the measure.

And China was quick to signal its approval of the Spanish prime minister’s new stance. The day after Sanchez publicly called for the European Commission to rethink the tariffs, China’s Foreign Ministry spokesperson Mao Ning praised him for “his rational and objective thinking.”

“We hope the EU side will … show flexibility and sincerity, and work with us to properly settle trade frictions through dialogue and consultation and promote the sound and steady growth of China-EU trade ties,” Mao added.

A Spanish government source told Reuters that they expected Sanchez’s statement to pay off in a literal sense as well, saying, “Sanchez's delegation came away feeling… that an agreement over tariffs on its pork products was close.”

A Chinese company also pledged to invest $1 billion in a plant to develop green hydrogen in Spain, Beijing’s way of signaling the potential for cooperation – and joint profit – on clean energy projects.

China’s efforts continued with Commerce Minister Wang Wentao’s visit to Europe from September 16 to 19. He visited Italy, Germany, and finally Brussels, where he met with EU trade chief Valdis Dombrovskis. The results were little to boast about, especially compared with Spain’s about-face. Italy confirmed that it continued to support the European Commission’s tariff decision; Germany remained neutral, advocating for a “negotiated solution” while stressing the need for “fair terms” of competition.

Dombrovskis indicated that he and Wang “agreed to intensify efforts to find an effective, enforceable, and WTO compatible solution” to the EV question. But, he added in a post on X (formerly Twitter), this commitment to negotiate would not “prejudice” the “EU investigation and its deadlines.”

So far, China has been unwilling to seriously negotiate, because it sees EVs as a critical industry for its economic future. Beijing also complains that the United States and EU have their own subsidy programs to support the EV industry. Rather than eliminating subsidies, China’s main proposal is offering a price floor for EV sales within Europe – a compromise that was dismissed by the Commission.

Despite Sanchez’s high-profile comment, China faces an uphill battle in seeking to sway European states to vote the motion down. Only four of the 27 EU member states voted against the tariffs in a non-binding vote in July. Even Germany, which has been critical of the move, abstained rather than voting “no,” and it’s expected to abstain yet again in the binding vote – if only because there seems to be no feasible path to successfully blocking the motion.

Still, the Commission appears nervous. The European Commission decided to postpone the final vote on the tariffs, originally scheduled for September 25. Politico, citing unnamed EU officials, reported that was likely a bid to shore up support from governments, like Spain’s, that might be wavering.

Ultimately, the upcoming vote will have ramifications beyond EVs or the broader clean tech industry. It’s a test of EU unity on an issue of critical importance to both Europe and China. As Alicia García-Herrero, a senior fellow at Bruegel think tank, told Euractiv, “If Europe really cannot get its act together on this… [we] are not going to get our act together on anything.”