Europe Trade War With China Is No Longer a Metaphor
Electric vehicle tariffs were the opening salvo. The retaliatory spiral is now accelerating.
The tariff cascade
When the European Commission imposed definitive tariffs of up to 45% on Chinese electric vehicles in October 2025, it presented the measure as a defensive response to unfair subsidies. Beijing saw it as economic aggression. Within weeks, China launched anti-dumping investigations into European brandy, dairy products, and pork β targeting sectors concentrated in France, Ireland, and Spain.
By January 2026, the spiral had expanded. China imposed restrictions on exports of critical minerals essential for European battery production. The EU responded by accelerating trade negotiations with Chile, Indonesia, and the Democratic Republic of Congo to secure alternative supply chains.
The manufacturer dilemma
European carmakers are caught in the crossfire. Volkswagen, BMW, and Mercedes-Benz derive significant revenue from the Chinese market and fear retaliation. But they also face existential competitive pressure from BYD, NIO, and other Chinese manufacturers whose cost advantages in battery technology are structural, not temporary.