MNI: EU-China EV Resolution Hopes Dim After U.S. Threats

The European Union is likely to suspend its efforts to reach a resolution with China over its tariffs on electrical vehicle imports pending the outcome of ongoing EU-U.S. tariff negotiations, EU trade sources said.

EU Trade Commissioner Maros Sefcovic and China's Minister of Commerce Wang Wentao have recently reopened ideas of a deal based on a voluntary floor price for China's EV exports to the bloc, but EU jitters at the threat of a U.S. backlash look likely to freeze such efforts, they said.

"Any kind of a deal with China could be seen as 'ganging up' on the U.S.," one said.  

US Treasury Secretary Scott Bessent has recently warned that the EU risked "cutting its throat" if it aligned itself with China, speaking after Spanish Prime Minister Pedro Sanchez visited Beijing. 

Commission President Ursula von der Leyen's Chief of Staff Bjoern Siebert will brief EU diplomats on Trade Commissioner Maros Sefcovic's latest trade mission to Washington this afternoon, although it appears the talks have made little headway so far, with the EU calling them a "scoping" exercise. (See MNI: EU To Keep China Option In Reserve As Seeks US Deal)

EU "JUST DREAMING"

An EU trade source described a resolution of the EV standoff as "improbable" also from the current car industry and market standpoint of the EU. The Commission and car industry have opened a strategic dialogue to address the sector's massive competitiveness challenges. (See MNI INTERVIEW 2: China Willing To Further Open To EU Imports)

Chief Economist for Asia-Pacific at Natixis and Senior Bruegel Fellow Alicia Garcia-Herrero told MNI the EU is "dreaming" if it thinks lifting the China EV tariffs is a good idea.

"I think the EU will think twice before lifting those EV tariffs, firstly because it does not really help (China's overcapacity is only increasing) and also because the U.S. market is simply much more important for the EU and the reciprocal tariffs are still looming (and some sectoral ones) are still looming,” she said.

"The EU was probably dreaming if it was expecting to lift tariffs on EVs from China without any pressure from the U.S. Spain's Minister of Finance Carlos Cuerpo was basically summoned by the Trump administration after Sanchez's visit to Beijing". 

Alicia Garcia-Herrero is also an economic adviser to the Spanish government and to the Hong Kong Monetary Authority among her other professional roles.