The 'Other' Trade War Between the EU and China: What's Happening Now? A Summary of Three Years of Conflict
We see news about the US-China conflict every day, but in its shadow, the trade war between China and the EU has also become quite intense.
This conflict, which began in 2023, has already seen its first round concluded and is now in the middle of the second round. While not widely reported in Japan, it involves many issues relevant to Japanese companies, such as rare earths and automobiles.
In this article, based on related reports from the Chinese-speaking world, I have organized the situation from a ‘neutral’ perspective rather than taking sides.
What you will learn in this article
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The behind-the-scenes story of how the EU imposed tariffs of up to 45.3% on Chinese EVs
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Why China retaliated with ‘brandy and pork, not cars’
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The background behind Germany’s change in stance during the second round
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The incident where a European car factory shut down over a single semiconductor company
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Why Chinese brands continue to sell well inside the tariff wall
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What this means for Japan
To begin with, why are they in conflict?
The EU’s argument is clear.
‘China is using government subsidies to overproduce and flood Europe with cheap products. Because of this, European factories and jobs are being lost.’
France and others claim that approximately 1 million jobs in the European industrial sector have been lost between 2019 and 2025.
On the other hand, from China’s perspective, this is simply protectionism, trying to shield industries that have lost their competitiveness through tariffs.
What is important to understand here is the internal situation of the EU. There are 27 member states and 24 official languages. Since industries and relations with China differ completely from country to country, opinions are divided on ‘who gains and who loses’ every time a policy toward China is decided.
This ‘lack of unity’ is the most important point in deciphering the China-EU trade war.
Round 1 (2023–2025): The Three-Way Struggle Over EV Tariffs
The trigger was an investigation into Chinese EVs
In September 2023, the European Commission launched an anti-subsidy investigation into Chinese EVs.
Formally deciding on tariffs requires a vote by member states, but the rules have changed slightly. To reject them, a ‘qualified majority’ of at least 15 countries representing at least 65% of the EU population is required. In other words, if they remain silent, the measure passes.
In the months leading up to the vote, member states split into three groups and continued to negotiate.
The Hardliners: France
It may be surprising, but France was the most hardline. There are three reasons for this.
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French cars have less than a 1% market share in China, so they have almost nothing to lose if retaliated against.
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About 40% of France’s own EV subsidies were flowing to Chinese-made EVs.
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A hardline stance against China aligned with President Macron’s policy of ‘European strategic autonomy’.
The Cautious: Germany
The center of opposition is Germany. As of 2023, about 80% of German car production was for export, and VW, Audi, BMW, and Mercedes-Benz all earned more than 30% of their global sales in China.
If China retaliates, Germany would be the first to be hit. In a sense, they were holding the ‘biggest hostage’.
The Wait-and-See Group: Spain
Spain voted in favor in the preliminary vote in July, but by September, they began saying that the tariff plan should be reviewed.
In fact, Spain is the EU’s largest exporter of pork to China, and China had just begun an investigation into EU pork shortly before. Moreover, Spain wanted to attract factories from Chinese automakers.
October 2024, the results of the final vote
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10 countries in favor: France, Italy, the Netherlands, Poland, Denmark, Ireland, Bulgaria, Estonia, Lithuania, Latvia
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5 countries against: Germany, Hungary, Slovakia, Slovenia, Malta
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12 countries abstained: Spain, Belgium, Czech Republic, Greece, and others
There was not enough opposition, so the tariffs were established.
The additional tax rates are 35.3% for SAIC Motor, 18.8% for Geely, 17.0% for BYD, 20.7% for others, and 7.8% for Tesla made in Shanghai. These are added to the original 10% automobile tariff. EVs from the MG brand, a subsidiary of SAIC, face a total of 45.3%.
China’s retaliation is pinpointing the ‘countries that voted in favor’
This is where it gets interesting.
Although China was attacked over EVs, it did not retaliate against European cars. This is because the heart of the European automotive industry is Germany, which opposed the tariffs.
Instead, it targeted things like these:
🍷 French brandy
99.3% of China’s brandy imports come from France, and China accounts for about a quarter of global cognac sales. After the anti-dumping measures, there were months where cognac exports to China dropped by more than 70%, leading the industry to cry out to the government.
(However, since the market for luxury spirits and watches was collapsing across China during this period, it cannot be said that the measures were the sole cause.)
🐷 Spanish pork
The EU is the largest supplier of pork to China, accounting for 47% of its imports. Ears, feet, and offal, which are not commonly eaten in Europe, sell for high prices in China, making it an indispensable market for the European pork industry.
China imposed tariffs of 4.9% to 19.8%, but significantly lowered them from the provisional stage. This can be read as a message to those waiting to see how things play out, signaling that there is room for negotiation.
🧀 French dairy products
Of the 15 European companies targeted for investigation, 12 were French.
And there was also a ‘carrot’
When President Macron visited China in December 2025, China treated him with the hospitality of a state guest. While a rumored large-scale contract for 500 Airbus aircraft did not materialize, it is said that an order for over 100 aircraft was placed a few weeks later.
Why not strike harder?
There were many voices on the Chinese internet saying the retaliation was ‘too soft.’ The author of the original article explains this as a ‘Tai Chi’ style strategy.
If you strike hard, the opponent unites; if you strike lightly, the opponent divides.
For the Chinese economy, exports are a lifeline, and the major buyers are in the West. Therefore, the priority is not to break the relationship, but to divide the opponent from within. Agricultural products were chosen because the monetary value is low and causes no damage to China itself, yet they generate significant political repercussions, such as farmers’ protests.
The real ‘trump cards,’ such as Airbus, luxury brands, and cosmetics, are being kept in reserve.
Result: Chinese cars actually sold better
If the EU’s goal was to stop the influx of Chinese cars, the first round was a failure.
In 2025, when tariffs were in full effect, China’s automobile exports to Europe reached a record high of 1.21 million vehicles. In the first quarter of 2026, they were reportedly up another 85% year-on-year.
Chinese manufacturers have three strategies.
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Cost competitiveness sufficient to absorb the tariffs
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Shifting to plug-in hybrid electric vehicles (PHEVs), which have lower tariffs
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Local production (Chery in Spain, BYD in Hungary, and Leapmotor at Stellantis’s Spanish plant)
Ironically, because of the tariffs, Chinese cars have become ‘expensive cars’ in Europe. Some models are priced nearly double what they cost within China.
In the past, people in China felt ‘genuine luxury’ in European cars that had become expensive due to tariffs. Now, people in Europe feel ‘genuine smartness’ in Chinese cars that have become expensive due to tariffs. But in reality, most of the price in both cases is tax.
Round 2 (2026–): The EU moves toward ‘total war’
Germany changes its stance
Alarmed by the results of the first round, the EU changed its approach.
In May 2026, France, along with Italy, Spain, the Netherlands, and Lithuania, argued that comprehensive measures against China were necessary rather than industry-specific investigations. In June, they proposed a mechanism for ‘rapid tariffs against China’ modeled after Section 301 of the U.S. Trade Act.
The biggest change is Germany. This time, they supported the French proposal and even began calling for a stronger yuan, claiming the currency is ‘25% undervalued.’ This is despite the fact that just four months earlier, the German Minister for Economic Affairs had been in Beijing discussing improving relations.
The backdrop to this is the rapid decline of German cars in China. Sales of Audi, BMW, and Mercedes-Benz in China reportedly fell by 5–20% in 2025 and by 19–28% in 2026. If the Chinese market that needs to be protected shrinks, the reason to fear retaliation also diminishes.
The ‘six weapons’ the EU has assembled
Although the European version of Section 301 was ultimately shelved, the following measures have been set in motion.
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Steel: Increasing tariffs on imports exceeding quotas from 25% to 50%
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Cross-border e-commerce: Abolishing the tax exemption for small packages under 150 euros. Of the 5.9 billion small packages that arrived in the EU in 2025, 91% originated from China. In addition to massive fines for Temu and SHEIN, a fast fashion regulation law has also been enacted in France
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Duck meat: Anti-dumping investigation into Chinese duck meat. This is the first time the EU has used trade defense measures on Chinese agricultural products
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Foreign Subsidies Regulation (FSR): Used as a means to stop bids and acquisitions by Chinese capital; CRRC Corporation withdrew from the Lisbon Metro project
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PHEV tariffs: A move to close the ‘loophole’ from the first round
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Draft investment regulations: These include limiting Chinese capital investment to 49% and requiring that EVs subject to public procurement be assembled within the region, with over 70% of their parts sourced locally. Even European automotive industry associations are opposed to this.
China’s Counterattack: Not Tariffs, but ‘Supply Chains’
In the second round, China changed its tactics. Instead of a tit-for-tat tariff war, it used its control over supply chains as a weapon.
Rare earths
China controls about 90% of the processing capacity for rare earths, which are essential for motor magnets and radar. As a result of China tightening export controls in April and October 2025, European companies were forced to halt production twice.
Because it is a licensing system, they can tighten or loosen it depending on the other party’s actions.
The Nexperia Incident
This incident best illustrates China’s way of fighting.
Nexperia is a Dutch semiconductor manufacturer that spun off from Philips and was acquired by a Chinese company in 2019. However, in the midst of the trade war, the Dutch government dismissed the Chinese CEO and froze the Chinese side’s management rights.
China had only one countermeasure: it stopped exports from the company’s Dongguan factory in China.
Since wafers were made in Europe and the back-end processing was done in Dongguan, global supply effectively stopped. Because these were parts with low inventory despite hundreds being used in every car, Honda had to stop production lines within weeks, VW issued a warning, and Bosch was forced to cut production.
The troubled European automotive industry protested not to China, but to its own Dutch government. The Netherlands suspended the seizure order in about a month and a half.
Why supply chains?
The numbers make it clear.
In a tariff war, the EU has about 2.5 times the target for taxation compared to China, putting China at a disadvantage. On the other hand, if supply chains are halted, European industry feels the pain immediately and pressures its own government.
That said, China has also signaled that it is ‘open to discussing procurement agreements that reduce the trade surplus,’ maintaining a stance of balancing pressure with dialogue.
For now, who has the upper hand?
To be honest, neither side has a decisive move.
The EU side has almost finished building its planned ‘wall.’ However, tariffs only increase the burden on consumers within the region and do not make European companies any stronger.
The Chinese side has succeeded in peeling off individual countries like Spain and the Netherlands, but it has not been able to stop the crucial rapprochement between Germany and France. In July 2026, Germany and France announced that they would compile a joint roadmap for trade with China by September. When Germany and France are aligned, the EU will act in earnest.
Chinese Brands That Still Sell
While walls are only getting higher in the world of politics, a completely different scene is unfolding in the market.
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Midea portable air conditioners: During the 2026 heatwave, used prices soared to more than three times the list price. It is said that some Germans even drove 200km away to buy them.
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Roborock robot vacuums: 27% global market share. High-end models in the 1,000-euro class are also selling well in Europe.
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DJI drones and cameras: Holds 70-80% of the global market share for consumer drones. New products are not being released in the U.S. due to regulations, leading to a situation where Americans are ordering them from Europe.
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Insta360: Together with DJI, they hold 85% of the action camera market. GoPro, which created this category, has shrunk to 10.7%.
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Ninebot electric kick scooters: Over 40% share in major European markets.
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Xiaomi: 3rd in European smartphone shipments. Average prices have risen by 21%, shifting from a ‘cheap secondary device’ to a ‘primary device’.
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Flower Knows: A flagship brand at UK Boots concept stores. This is an expansion into the heart of the beauty industry.
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HEYTEA: Long lines at the first London store. Overseas locations have exceeded 100 stores.
And the most extreme case is SHEIN. Despite being the biggest target of regulations, it has responded by placing warehouses within the EU and earns 35% of its sales in Europe. It is ironic that France, which is the most opposed, is its largest market. Its share of the global fast fashion market has reached 18%, surpassing Inditex, the owner of ZARA, to become number one in the world.
Paying fines while becoming number one in sales globally. This is what is happening ‘inside the tariff wall’.
Does History Repeat Itself?
In 1793, Britain, which had overwhelming competitiveness due to the Industrial Revolution, asked the Qing Dynasty to open its markets and was refused. About half a century later, Britain forced the doors open with the Opium War. The U.S. was also a high-tariff country when it was founded, but it became a champion of free trade once it held hegemony, and then returned to tariffs once its manufacturing industry hollowed out.
The most competitive country calls for free trade, and the country that has lost its competitiveness builds walls.
However, the EU also has its own argument. It claims that distorting the market with subsidies is what goes against fair free trade. Furthermore, the wariness of using rare earths and semiconductors as bargaining chips is shared not only in Europe but all over the world.
‘Which side is standing for free trade’ may be a question where the answer changes depending on one’s position.
What It Means for Japan
Finally, three points from a Japanese perspective.
1. The rare earth issue is not over
Japan experienced China’s rare earth export restrictions in 2010 and has been a leader in diversifying its procurement sources. Even so, the fact that European companies were forced to halt production twice shows that this risk remains a reality.
2. The competitive environment in the European market is changing
EU tariffs and local procurement regulations also affect Japanese automakers and parts manufacturers operating in Europe. Chinese brands gaining strength inside these walls are also direct rivals to Japanese companies.
3. A theme that will eventually be questioned in Japan as well
The offensive of Chinese cars, regulations on e-commerce platforms, and the balance between economic security and free trade. What is happening in Europe may be a preview of the debates Japan will face in a few years.
“Protect through tariffs, or win through competitiveness?” The conflict between China and Europe is posing this old yet new question to Japan as well.
In conclusion
Regardless of the country, it is because of free trade that we, the common people, can obtain the cheapest or most cost-effective goods from around the world. Thanks to that, even those who are not wealthy can lead reasonably convenient and comfortable lives. For the common person, there is no doubt that trade barriers are nothing but a loss. What is truly needed now is politics and diplomacy that properly focus on the interests of ordinary people, isn’t it?