Just a year and a half after months of politically motivated trade tensions between the bloc and China, the European Union is considering a significant rollback of policies targeting electric car makers in the People’s Republic of China.
According to the latest reports published by the New York Times and the South China Morning Post on January 12, the European Commission, the EU’s executive agency, and the Chinese Ministry of Commerce announced new guidance that will replace the high tariffs on imported electric vehicles from China.
The new policies will allow automakers with factories in China, as well as Chinese automakers, to voluntarily limit the number of cars shipped from China to Europe. In addition, the new European Commission document also outlines that Chinese exporters will set a minimum price for the above-mentioned cars; the EU will calculate this number based on the ability to “eliminate the harmful effects of subsidies and provide equivalent tariff effects.” The commission also implored Chinese electric car brands to clarify their future investment plans in the EU.
Carmakers that cooperate with the European Commission on its price controls and import restrictions program could be exempted from countervailing duties of up to 35% on imported Chinese electric vehicles, first proposed by the Commission in 2024. In a statement to The Times, European Commission spokesman Olof Geer pointed out that the European Commission has maintained flexibility with its counterparts in the People’s Republic of China on this issue, and this measure is an example of this.
“We have said from the beginning that as the European Commission, as the investigating authority in this case, we are willing to consider alternatives to the countervailing tariffs that we have imposed,” Gill said.
In a separate statement seen by the South China Morning Post, China’s Ministry of Commerce said the new proposal “fully embodies the spirit of China-EU dialogue and the results of consultations,” adding, “This shows that China and the EU have the ability and willingness to properly resolve differences through dialogue and consultation within the framework of WTO rules and maintain the stability of China, the EU, and the global automotive industry and supply chains.”
The rules come as the two economic superpowers are at odds with each other over conflicting policies. In October 2024, the European Union released details of its investigation into government subsidies by Chinese automakers, claiming that this gave Chinese automakers a competitive advantage over European rivals in the electric vehicle market.
Much like the proposed new ruling, the tariffs are based on the amount of subsidies each Chinese automaker receives, ranging from 7.8% for Shanghai Tesla, the subsidiary that makes the China-exclusive Model Y, to 35.3% for SAIC, the state-owned automaker that owns the British heritage brand MG. In response to the tariffs, Beijing officials launched counter-investigations into certain products that they believed were being flooded by the EU, including European brandy and cognac (namely Rémy Martin and Hennessy), pork and dairy products.
While the measures are intended to protect the European car market from giants such as BYD, they also affect Western automakers that produce cars for Europe in China, including BMW, which makes the iX3 sold in the EU in China, and Volvo, which moved production of the EX30 sold in the EU from China to Belgium to reduce risks. At the time, then-Stellantis CEO Carlos Tavares said the tariffs would be counterproductive.
“There is no question that these short-term actions will have negative mid- to long-term effects,” Tavares said at the time. “The best way, the only way, to protect ourselves, our industry, our workers, is to compete with the newcomers and raise our game.”
The rules proposed by the EU and Chinese governments are not entirely new, as similar measures were tried during U.S.-Japan trade tensions in the early 1980s, when the visual dominance of Japanese companies in key industries such as electronics, steel, shipbuilding, textiles, and especially automobiles led U.S. politicians, workers, and the Central American public to lament the Land of the Rising Sun.
During this period, the rise of small imported Japanese cars caught the attention of Detroit automakers, as sales data showed that U.S. small car sales increased by a third between 1978 and 1980, and U.S. automakers lost more market share.
In February 1980, UAW President Douglas Frazier traveled to Japan to persuade Japanese automakers to implement voluntary export restrictions and consider establishing operations in the United States. However, Japanese companies are reluctant to enter the unfamiliar U.S. business environment. In July, the United Auto Workers and Ford Motor urged the U.S. International Trade Commission (ITC) to investigate whether the influx of Japanese cars was harming the domestic auto industry. Despite their claims, the International Trade Commission ruled in November that the economic problems were caused primarily by the recession and the inability of U.S. industry to meet demand for fuel-efficient vehicles.
Influenced by the political climate during the 1980 presidential election, narratives of doom for Japanese imports became prevalent. At a campaign event in Michigan, Ronald Reagan assured autoworkers that “in one place where the government can legitimately get involved, I think the government has a role here that it has hitherto shied away from, and that is to somehow convince the Japanese that, in their own best interests, the flow of automobiles into the United States must be slowed while our industry gets back on its feet.”
Despite strong urging from a bipartisan group of lawmakers to impose trade restrictions, nothing significant initially occurred. In the early days of the Reagan administration, Japan’s Ministry of International Trade and Industry came under pressure and signed the Voluntary Export Restrictions (VER) Agreement that took effect on May 1, 1981. Under the agreement, Japan set its own quota for automobile exports to the United States, which was 1.68 million vehicles per year from 1981 to 1983 and later increased to 2.3 million vehicles in 1985.
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It’s important to recognize this small detail in the EU proposal, which requires Chinese carmakers to “plan future investments in the EU,” as it could have implications for both the EU and China as a result of what happened in the United States with similar policies to crack down on Japanese imports.
During this period in the 1980s, Japanese automakers began exploring domestic manufacturing in the United States to avoid export restrictions. Honda first arrived in Marysville in 1982, followed by Nissan in 1983 when it opened an assembly plant in Smyrna, Tennessee. Toyota opened an assembly plant in Georgetown, Kentucky, in 1988, followed by Subaru in 1989 in Lafayette, Indiana.
The impact is undeniable. According to the Japan Automobile Manufacturers Association, Japanese automakers directly employ more than 110,000 people. Since 1982, Japanese automakers have produced more than 100 million vehicles in the United States, with one-third of them produced in the United States bearing Japanese branding. If the two sides cooperate, Chinese carmakers will have the opportunity to redefine the face of European cars, and if both sides agree on all aspects, it is expected to revitalize the European industrial core.
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This article was originally published by Autoblog on February 8, 2026 and first appeared in the News section. Click here to add Autoblog as your preferred source.