China Responds to EU’s EV Tariffs by Pausing Key Investments

China urges automakers to reconsider EU investments in response to new tariffs, stirring the global EV landscape.

Editorial Team (ET)July 15, 2025

In a significant escalation of trade tensions, China has directed its automakers to pause new investments in European Union (EU) countries that have imposed tariffs on Chinese electric vehicles (EVs). The EU recently enacted tariffs of up to 45.3% on Chinese-built EVs, a move intended to shield European automakers from what they claim is unfair competition. China’s Ministry of Commerce met with several top automakers, including BYD, SAIC, and Geely, advising them to halt or reconsider large-scale investments in nations backing these tariffs. This article explores the strategic and economic implications of this development in the ongoing EU-China trade dynamic.

EU’s Tariffs on Chinese EVs

In response to a surge in Chinese EV imports, the EU imposed steep tariffs following a year-long investigation. EU officials argue that subsidies and state-backed support have allowed Chinese automakers to export vehicles at prices that undermine European manufacturers. The tariffs aim to level the playing field, but they also risk inflaming an already tense trade relationship with China.

China’s Directive to Halt Investment

China’s Ministry of Commerce’s directive urges its automakers to hold back investments in EU countries that supported the tariffs. The Chinese government has suggested that these automakers take a united approach, collectively refraining from investment in these EU markets and considering options in countries that either abstained or opposed the tariff imposition.

Impact on Chinese Automakers

BYD, SAIC, and Geely: Investment Strategies Under Review

Chinese EV giants such as BYD, SAIC, and Geely have been expanding aggressively in Europe, a key export market for Chinese EVs. Following the Ministry of Commerce’s advisory, these companies are now reassessing their plans for production sites and expansion in the EU. BYD, for instance, has invested in a production plant in Hungary, which voted against the tariffs.

Meanwhile, SAIC, a major exporter of Chinese-made MG cars, was previously planning to expand its parts center in France—one of the countries supporting the tariffs.

Shifting Investments to Tariff-Resistant Markets

China’s stance may redirect investments toward EU countries that oppose or abstain from supporting the tariffs, with Hungary and Spain emerging as likely beneficiaries. Hungary, already hosting BYD’s operations, opposed the tariffs, aligning itself with China’s strategic interests. Spain, which abstained, has also become attractive for Chinese EV investments, especially following a recent visit from Spanish Prime Minister Pedro Sanchez to China.

The Potential Impact on Europe’s EV Market

Europe’s reliance on Chinese EVs has been growing, with China accounting for over 40% of the EU’s EV imports. If Chinese automakers curtail or even withdraw from tariff-imposing countries, it could limit EV availability in Europe, driving up prices and potentially hindering Europe’s green transition goals.

The tariffs may also exacerbate overcapacity issues in China’s domestic EV market, putting additional pressure on manufacturers to find alternative export markets or further boost domestic sales.

The Broader Implications

China’s response to the EU’s tariff decision reflects a broader trend of economic assertiveness in international trade. By selectively targeting countries within the EU, China is leveraging its economic weight to push for favorable trade conditions while avoiding blanket retaliation.

Conclusion

China’s recent directive to pause investments in EU nations supporting new EV tariffs underscores a strategic maneuver in response to the EU’s protective trade policies. With key EU markets now potentially off-limits for future Chinese EV investments, the balance of power in the EV industry may shift, affecting automakers and consumers alike. The move also sends a message that China is willing to safeguard its interests on the global stage and counter economic measures that threaten its expanding EV sector.

China

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