Is the EU already in a trade war with China?

But that’s not all, is it?

Absolutely, the EU has launched probe after probe this year. With the latest investigations into steel pipes, the food additive lysine and the taste component vanillin, the count stands at no less than 13. None are as high-profile as the electric vehicle case, but that doesn’t mean Beijing won’t take notice.

In addition, Europe is now wielding the economic armory it has assembled, using a combination of trade and competition tools to tackle Chinese bids for European wind park tenders and sales of airport security scanners, as well as Beijing’s own procurement of medical equipment.

How will China strike back?

Beijing (correctly) sees France as having instigated the EV probe and has hit back with a dumping probe of its own into “wine-distilled brandies from the EU” — a.k.a. French cognac. President Emmanuel Macron, hosting President Xi Jinping this month, claimed a win after their talks, saying the Chinese leader didn’t want to impose pre-emptive tariffs.

But cognac makers don’t believe it, saying fatalistically that they are doomed to become “collateral damage” in the fight over electric vehicles.

Now China is setting its sights on German luxury cars. In an interview with state media, Liu Bin, a top automotive adviser, recommended raising temporary tariffs on large-engine vehicles imported from Europe to 25 percent — a move that would hurt the likes of sports car and SUV maker Porsche. 

While German auto brands are exposed to China, their premium models would be able to take such a hit, according to Matthias Schmidt, a European automotive analyst: “The models impacted are all high-end premium models that can either soak that up in higher pricing or lower margins but remain profitable.” Similarly, analysts expect Chinese exporters to be able to swallow whatever the EU decides in its subsidy investigation.