The trade standoff between China and the European Union over electric vehicles (EVs) entered a new phase on Thursday, as Beijing issued a sharp warning against Brussels’ attempts to negotiate separate deals with individual automakers.
In a press conference on the afternoon of December 18, the Chinese Ministry of Commerce (MOFCOM) welcomed the EU’s return to the negotiating table regarding “price undertakings”, a mechanism to set minimum export prices in lieu of tariffs. However, the olive branch came with a distinct red line: a stern caution that consulting with individual companies would “undermine mutual trust” and fracture the negotiation process.
China’s Commerce Ministry Press Conference
Speaking, the ministry’s spokesperson, He Yadong stated that China strongly opposes the European Commission’s recent series of investigations into Chinese companies under the Foreign Subsidies Regulation (FSR). He expressed hope that the EU will immediately cease its unreasonable suppression of foreign-invested enterprises, including those from China, and use the FSR investigation tool prudently to create a fair, just, and predictable business environment for companies investing and operating in Europe.
He Yadong said, “We hope that the EU will work with China to abide by the important consensus reached at the China-EU leaders’ meeting, jointly oppose protectionism, maintain open markets, exercise restraint and prudence in using restrictive trade and economic tools, and provide a fair, transparent, non-discriminatory, and predictable business environment for Chinese enterprises to carry out trade and investment cooperation in Europe.”
A reporter asked, “French President Macron published a commentary in the Financial Times stating that during his last visit to China, he emphasized balancing trade relations with China, but did not rule out taking more protectionist measures. What is the Ministry of Commerce’s comment on this?”
In response, Ministry of Commerce spokesperson He Yadong stated, “We have noted the relevant statements. China has always maintained that the essence of China-EU economic and trade relations is complementary advantages and mutual benefit. China-EU economic and trade cooperation is the result of a combination of factors, including differences in the economic development stages and industrial structures of both sides, as well as changes in market demand.”
For seasoned observers, the subtext was clear. Beijing is moving to block a “divide and conquer” strategy by the European Commission, which has reportedly opened a back channel for Volkswagen’s Chinese joint venture to secure a lower tariff rate for its Cupra Tavascan model.
The Cupra Tavascan Angle
At the heart of this diplomatic friction is the Cupra Tavascan, an electric SUV designed in Barcelona but manufactured exclusively in Anhui, China, by a joint venture majority-owned by Volkswagen.
Under the definitive tariffs imposed in October 2024, the Tavascan was hit with a 20.7% countervailing duty on top of the standard 10% import tax, a combined burden of 30.7% that Cupra CEO Wayne Griffiths warned would “wipe out” the car’s profitability.
In early December 2025, the European Commission initiated a “partial interim review” specifically for Volkswagen Anhui. The proposal on the table is a “price undertaking”—VW would agree to sell the Tavascan at a minimum price in the EU in exchange for waiving the duties.
Beijing views this as a strategic threat. If the EU cuts a special deal for a “European” car made in China, it could encourage other manufacturers—including Tesla and private Chinese firms like Geely—to break ranks with the state-backed China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) to cut their own bilateral deals.
“If the ‘united front’ of the CCCME is broken, Beijing’s leverage to negotiate a removal of tariffs for all Chinese players, including state-owned giants like SAIC, will evaporate,” notes the analysis.
China’s Deals With EU Products
While holding the line on EVs, Beijing has deployed a sophisticated “carrot and stick” strategy regarding European agricultural exports, specifically targeting nations that supported the EV tariffs.
- Pork: On December 16, just days before the MOFCOM statement, China announced its final ruling on the anti-dumping investigation into EU pork. In a surprise de-escalation, it set the duties at a manageable 4.9% to 19.8%, rather than the prohibitive 60%+ rates initially feared. Analysts describe this as a “masterstroke,” keeping the trade alive just enough to maintain leverage over the powerful Spanish pork lobby without severing ties completely.
- Brandy: In a mirror move, Beijing has accepted price undertakings from French cognac giants like Martell (Pernod Ricard) and Hennessy (LVMH), allowing them to avoid high anti-dumping duties. This sets a rhetorical trap: China is asking why Brussels refuses to grant Chinese EV makers the same “price undertaking” flexibility that Beijing just granted French luxury distillers.
Industrial Realignment: BYD Advances, SAIC Stalls
Outside the negotiation rooms, the tariffs are already reshaping the industrial map of Europe.
BYD is effectively bypassing the trade war. On December 9, 2025, the first batch of production equipment arrived at its new factory in Szeged, Hungary. Trial production is slated for Q1 2026. Once operational, BYD’s Hungarian-made cars will count as “EU origin,” facing 0% tariffs.
In contrast, state-owned SAIC (the parent company of MG) is in a delicate position. Hit with the highest tariff rate of 45.3%, SAIC’s sales in Europe are under existential threat. The company had planned to announce a European factory by September 2025, but political pressure from Beijing—warning SOEs not to invest in countries that voted for the tariffs—has reportedly forced them to abandon plans for a plant in Spain, leaving them in limbo.
Our View
Recent events mark a shift from the “Tariff Phase” to the “Regulatory Phase” of the EU-China decoupling. The real story is that the Chinese bloc faces division,
Additionally, the new German Chancellorship of Friedrich Merz adds a complex variable. While Merz is a geopolitical hawk on China, his domestic push to roll back the 2035 combustion engine ban (replacing it with a 90% reduction target) inadvertently aids German legacy automakers while diluting the advantage of Chinese pure-EV players.
The EU’s reluctance to accept a broad “minimum price” deal stems from the solar panel disputes of 2013, where such agreements failed due to massive circumvention. Brussels is terrified of repeating that mistake with cars, which are far more complex than solar panels.
Prediction for Q1 2026: Expect the EU to proceed with the VW Anhui deal despite Beijing’s protests. This will likely trigger a formal WTO dispute from China. Meanwhile, the “Hungary Lifeboat” will become the new reality: by mid-2026, tariffs will be irrelevant for BYD as they begin EU production, leaving slower-moving state-owned enterprises like SAIC to bear the brunt of the trade war.
