China's Trade Tactics Influence EU's EV Tariff Decision

China is employing a carrot-and-stick strategy as the EU contemplates duties on Chinese electric vehicles (EV). Beijing is threatening trade retaliation while negotiating individually with EU states. Spain, France, and Italy may face counter-tariffs on pork, dairy, and brandy exports. Meanwhile, China seeks to avoid a trade war while pushing for favorable votes in the EU.

China is adopting a carrot-and-stick strategy as the European Union (EU) prepares to vote on duties on Chinese electric vehicles (EVs). Beijing has threatened trade retaliation while engaging in one-on-one talks with key EU states. This approach aims to tilt the balance in China’s favor by targeting specific sectors like pork, dairy, and brandy exports from states such as Spain, France, and Italy.

Spanish Prime Minister Pedro Sanchez recently visited China, highlighting a potential agreement over tariffs on pork products. In addition, a Chinese company agreed to invest $1 billion in Spain for hydrogen production machinery, signaling backing for Spain's green ambitions.

China is leveraging its significant import market to maximize political costs for those pushing the EV tariffs while steering clear of a trade war. With Chinese Commerce Minister Wang Wentao set to meet EU trade chief Valdis Dombrovskis, China aims to gather enough opposition within the EU to tilt the upcoming vote in its favor.