Supply Chains Under Strain: Could China-EU Talks Yield Deal?
The European Union and China are preparing to open formal negotiations on setting minimum prices for EVs made in China.
The talks follow months of tariff disputes and come at a moment when global supply chains are navigating the competing demands of fair trade, cost efficiency and environmental responsibility.
The move to explore a pricing agreement arrives as an alternative to tariffs imposed by the EU in October 2024. Those levies added 17% on vehicles from BYD and up to 35.3% on EVs from SAIC, on top of existing EU import duties.
The decision aimed to level the playing field for European automakers, but it quickly exposed tensions in global trade and risks to supply chains.
China’s Ministry of Commerce confirms that negotiations will begin immediately. According to Reuters, both parties are exploring whether minimum pricing - rather than taxes - might ease concerns over unfair competition.
For China, the shift offers a way to avoid escalating retaliation. For the EU, it could be a chance to keep EV prices competitive while maintaining some level of market protection.
Meanwhile, the United States is pursuing a far more aggressive line. On 9 April, it announced a 90-day pause on sweeping new tariffs: 125% on Chinese goods and 20% on European exports. That brief reprieve does little to mask broader tensions, particularly in the automotive sector, where supply chains stretch across continents.
On 2 April, President Hildegard Müller of the German automotive association VDA stated that the US approach “represents the US's departure from the rules-based global trading order - and thus a departure from the foundation for global value creation and corresponding growth and prosperity in many regions of the world.”
She warned the tariffs are “a massive burden and challenge for both companies and the global supply chains of the automotive industry.”
Shifting volumes and evolving strategies
Data from the first two months of 2025 shows how much the EU-China EV trade has grown. More than 50,000 battery electric vehicles (BEVs) arrived from China, while plug-in hybrids, which are not covered by the EU’s tariffs, surged by 892% to reach 25,900 units. These shifts are reshaping market strategies.
In 2023, Chinese brands such as BYD held 8% of the EU’s BEV market. But following the 2024 tariffs, growth has slowed. EU exports in the other direction have not kept pace—only 11,499 BEVs made it to China from Europe in 2023, with no major increase expected.
Some Chinese companies are moving to secure their position by establishing production sites inside Europe. BYD is one such example, with construction of a plant in Hungary expected to begin later in 2025. That could help Chinese automakers reduce logistical emissions, bypass import costs and adapt to the EU’s sustainability requirements.
Balancing market access with environmental impact
Minimum prices would prevent Chinese EVs from undercutting European rivals but may also drive up consumer prices.
Automakers like Volkswagen and Stellantis already face 30–40% higher production costs compared to their Chinese counterparts. That’s partly due to China’s domestic subsidies, but the cost gap has big implications for both competition and affordability.
There’s also concern over whether price controls will help or hinder environmental targets. The European Environment Agency reports that transport accounted for roughly one-quarter of EU CO₂ emissions in 2019, with road vehicles responsible for nearly 72% of that total. Higher prices on EVs could delay adoption, extending reliance on petrol and diesel models.
New EU regulations will add further pressure on supply chains. From 2027, EV batteries must contain at least 50% recycled lithium, increasing to 80% by 2031. That step is intended to reduce the need for new raw material mining, but implementing the rules will be a challenge as manufacturers already juggle sourcing, shipping and geopolitical complications.
Some automakers fear Chinese imports could undermine the EU’s clean energy technology sector. Protecting domestic production may accelerate development, but also risks fragmenting global trade relationships. Even Tesla, whose market share in Europe has fallen, could be hurt if a pricing deal allows more Chinese competitors to gain ground.
Environmental benefits of producing EVs in Europe depend on the source of electricity. Countries still reliant on fossil fuels may erase some of the emissions savings achieved through local production and shorter supply chains.
The EU finds itself walking a tightrope: keep markets open or protect local jobs and climate goals. Whether a minimum pricing agreement offers a true compromise remains to be seen.
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