Trump's crazy tariffs are forcing the EU and China to renegotiate electric cars – an agreement that could change the entire market.
The electric car market in Europe could be facing a major change. The EU and China have begun negotiations to replace the current tariffs on electric cars with a new model that would introduce minimum prices for Chinese-made electric cars.
The decision comes in the wake of Trump's new tariff war , which has sent shockwaves through world trade.
The US president has imposed tariffs of up to 125 percent on Chinese goods – and 20 percent on goods from the EU. However, the US tariffs have been temporarily suspended for 90 days.
Minimum prices instead of tariffs
According to Reuters, both the European Commission and the Chinese Ministry of Commerce are open to a new model that would ensure fair competition without unnecessarily pushing up electric car prices.
Specifically, this could mean that minimum prices for export electric cars from China replace the high tariffs that currently affect BYD and SAIC , among others, with 17 and 35.3 percent respectively on top of the EU's general car import tariffs.
Negotiations are already underway, and plug-in hybrids in particular – which are currently exempt from tariffs – are playing a role. Sales of Chinese plug-in hybrids in the EU increased by a whopping 892 percent in the first two months of the year.
According to the EU, the goal is to protect European manufacturers while avoiding penalizing consumers, who could otherwise see electric cars increase in price.
Trump's tariffs will have an indirect effect in the EU
While Trump has chosen to attack China and the EU hard with massive tariffs, the EU is trying to find a middle ground. VDA President Hildegard Müller calls Trump's tariff strategy "a break with rules-based world trade."
German car manufacturers in particular fear retaliation if the EU severely punishes Chinese brands. China is an important export market – especially for German premium brands.
At the same time, several Chinese manufacturers are starting to move production to Europe. BYD is expected to begin construction of a new factory in Hungary later in 2025. This could potentially reduce the need for tariffs and make Chinese cars more acceptable in the European market.
Can increase prices – and slow down the green transition
Critics say a new agreement with minimum prices could lead to higher prices for European consumers. If cheap Chinese electric cars can no longer be sold below a certain threshold, it will particularly hit consumers who want to switch to electric – but cannot afford a European model.
The EU aims to reduce emissions from the transport sector, which accounted for 72 percent of all CO₂ from road transport in 2019. But more expensive electric cars could mean more people stick with their petrol and diesel cars.
At the same time, the EU has plans to make electric car production greener. From 2027, batteries must contain at least 50 percent recycled lithium – in 2031 the requirement increases to 80 percent. This places high demands on both European and Chinese manufacturers.
Tesla and European brands under pressure
If more electric cars from China are allowed to enter, Tesla risks being further squeezed in Europe. The company has already seen declining sales figures, and cheap competition from China could exacerbate that trend.
For European manufacturers like Volkswagen and Stellantis, Chinese prices pose a challenge. According to the VDA, production costs in Europe are 30 to 40 percent higher than in China – mainly due to lower government subsidies and more expensive labor.
Therefore, the EU is now caught between the desire for a green transition and the need to protect its own car manufacturers.
Risk of trade war – or new balance?
The EU hopes to avoid a full-blown trade war with China. In 2023, the EU exported only 11,499 electric cars to China, while over 50,000 Chinese battery cars were sent the other way – in January and February 2025 alone.
With minimum prices instead of tariffs, the EU hopes to create a more balanced competitive situation – without hitting either climate ambitions or consumers' wallets too hard.
But nothing has been decided yet. Negotiations could drag on, and the risk of new tensions in world trade still lurks just below the surface.
