Brussels and Beijing enter the final stretch before an October deadline with the electric vehicle minimum price mechanism only half built, Chinese duties still collecting on European pork, dairy and brandy, and a new fight over investigative jurisdiction poisoning the well.
BRUSSELS, August 25, 2026
The most consequential number published in the China-EU trade file this week did not come from a customs notice or a ministry announcement. It came from a bank. In a report dated August 23 and circulated widely on August 24, Goldman Sachs economists Xinquan Chen and Chelsea Song calculated that the European Union’s existing and proposed trade measures against China now touch roughly 27 percent of China’s annual nominal exports to the bloc, a figure reported by Bloomberg and carried by SupplyChainBrain. The estimate lands with three weeks to go before Brussels and Beijing are meant to show results from a negotiating process that has run, in one form or another, since the autumn of 2023.
Goldman was careful to caveat the headline. The range of the EU’s curbs “does not translate directly to export loss, with actual impact contingent on final policy specifics and implementation,” Chen and Song wrote, according to the Bloomberg account. “Broader restrictions would threaten China’s market-share gains, though cost competitiveness, leverage in critical materials and Europe’s commercial interests should cushion the impact.” With the bloc absorbing 15 percent of China’s overseas sales last year and shipments rising again in recent months, the economists concluded that European trade policy “has become a growing policy risk for China’s export outlook.”
That assessment arrives at an awkward moment for the flagship attempt to defuse the dispute. The centrepiece of the de-escalation effort, a minimum import price mechanism designed to replace the EU’s countervailing duties on China-made battery electric vehicles, has produced exactly one accepted undertaking in seven months of operation. The tariffs it was meant to supersede remain in force. So do the Chinese duties on European pork, dairy and brandy that were rolled out in retaliation. And in the past week, a separate quarrel over the reach of EU subsidy investigations has given both capitals a fresh reason to distrust each other.
The tariff wall that is still standing
The architecture is worth restating precisely, because the headline percentages circulating in commentary often conflate two different levies. Following an anti-subsidy investigation opened in October 2023, the European Commission imposed definitive countervailing duties on battery electric vehicles imported from China at the end of October 2024, at rates running from 7.8 percent to 35.3 percent depending on the exporter, for a five-year term. Those duties sit on top of the European Union’s standard 10 percent most favoured nation tariff on passenger cars. The maximum combined rate, applied to SAIC and the group of exporters the Commission found non-cooperative, therefore reaches 45.3 percent. Tesla’s Shanghai output drew the floor rate of 7.8 percent. BYD was assessed at 17 percent. Volkswagen’s Anhui joint venture drew 20.7 percent, or 30.7 percent all in, as electrive has reported.
The commercial effect has been real but partial. Analysis published by Transport and Environment found that electric cars produced in China accounted for 17 percent of the EU battery electric market in the first quarter of 2026, down from a peak of 22 percent in 2024 when the duties were introduced. Yet the same analysis found that BYD more than doubled its battery electric imports into the EU despite its 17 percent rate, and that battery electric vehicles from Chinese brands remained roughly 21 percent cheaper than comparable European models. BYD overtook Tesla in European registrations in the first half of 2026, with 174,144 units against 170,351, according to figures cited by EU Perspectives, which attributed much of the gain not to absorbing the duties but to pivoting into plug-in hybrids that the countervailing measures do not cover.
That loophole has not gone unnoticed. Among the European Union’s main new proposals, according to the Goldman note, are fresh tariffs on plug-in hybrid vehicles. The bank also flagged an extension of the EU Carbon Border Adjustment Mechanism beyond basic steel and aluminium as, in its words, “a major escalation, with China facing the largest exposure,” potentially bringing an additional 58 billion dollars of Chinese exports into scope. Electrical equipment, transport equipment and machinery would be primarily at risk. Goldman estimated those three sectors contributed 4.9 percentage points of China’s 8.5 percent nominal export growth to the EU last year, while cautioning that effective implementation is unlikely before 2028 and that “the actual tax rate on downstream products may represent only a small share of the final export price.”
How the minimum price mechanism is supposed to work
On January 12, 2026, after what electrive described as fifteen months of negotiation with China’s Ministry of Commerce, the Commission published a guidance document setting out how Chinese exporters may offer a price undertaking in exchange for exemption from the countervailing duties. The Commission’s own summary is deliberately flat: the document “covers various aspects to be addressed in a possible undertaking offer, including the minimum import price, sales channels, cross-compensation, and future investments in the EU.”
The mechanics are more demanding than the summary suggests. Minimum import prices must be specified for each model and each configuration option, a requirement that reflects how much battery capacity, range and equipment level move the economics of a single nameplate. The guidance sets out two permissible methodologies. The first anchors the floor to the exporter’s own cost, insurance and freight price during the original investigation period, uplifted by the margin of the countervailing duty imposed. The second anchors it to the sales price of an unsubsidised, EU-produced battery electric vehicle of the same or a very similar product type, including selling, general and administrative expenses plus an appropriate profit margin. Under either route, the Commission has said the floor must be set at a level appropriate to remove the injurious effects of the subsidisation.
China’s Ministry of Commerce welcomed the publication on the day, framing it as delivery on political commitments. The guidance contributes to implementing “the consensus of the China-EU Summit and properly resolv[ing] the EU’s anti-subsidy case concerning Chinese battery electric vehicles,” the ministry said in a statement posted on X and quoted by electrive, adding that both sides “have the ability and willingness to properly resolve differences through dialogue and consultation under the framework of WTO rules and maintain the stability of automotive industrial and supply chains in China, the EU, and the whole world.” Business groups were warmer still. The China Chamber of Commerce to the EU said the mechanism would bring a “soft landing” to the standoff, giving Chinese brands the comfort to plan long-term exports without paying the higher border rates, as the South China Morning Post reported.
One undertaking, and then a pause
The first and so far only acceptance came on February 10, 2026. The Commission approved a price undertaking from Volkswagen (Anhui) Automotive Company Ltd. and its related party in the Union, SEAT S.A. of Martorell, Spain, covering the CUPRA Tavascan. The vehicle may now enter the EU at or above its proposed minimum import price free of countervailing duty, following what the Commission described as an investigation showing that the proposed floor “would not be injurious to EU industry.”
Two features of that decision matter more than the model itself. First, the price floor was not the only condition. Volkswagen (Anhui) also committed to limiting its import volumes and to investing in significant battery electric vehicle projects inside the EU with clearly defined milestones, which the Commission said supports the bloc’s industrial strategy and incentivises compliance with its climate transition goals. Second, the enforcement teeth are explicit. “Failure to comply with the terms of the undertaking, including investment milestones, may lead to withdrawal of the undertaking by the Commission and a retroactive reinstatement of duties,” the Commission stated.
Since February, the pipeline has been quieter than either side implied in January. Reuters reported on July 18, 2026 that the Commission and Chinese negotiators had agreed to continue technical discussions on the undertakings, with the workstream focused on enforceability, transparency and monitorability rather than on headline price levels. No further acceptances have been published on the Commission’s trade news page. The practical read for exporters is that a template now exists, that it demands volume caps and capital expenditure alongside a price floor, and that it is being applied model by model rather than company by company or country by country.
That granularity is exactly what critics predicted would slow the mechanism down. Writing for Bruegel on January 22, Alicia García-Herrero and Daniel Gros argued that the Commission’s model-specific methodology “presents administrative challenges” in a market where specifications change constantly, and questioned whether Brussels has the capacity to police whether an upgraded battery pack justifies a price increase of several hundred or several thousand euros. Their broader verdict was blunter. Because the floors are calibrated in part to import prices from an earlier, more expensive period, they wrote, European prices could be set artificially high while Chinese exporters keep the difference between their actual cost base and the mandated floor as margin. On the fiscal side, the pair estimated that roughly 2 billion euros of annual EU budget revenue could be forgone if exporters migrate en masse from duties to undertakings, based on around 10 billion euros of Chinese electric vehicle imports at an average duty of about 20 percent. They also noted that no price undertaking has been enacted in an EU anti-subsidy case since the photovoltaic panel arrangement of 2013. Their conclusion was that the mechanism “should be scrapped.”
There is a consumer dimension too. The German daily Frankfurter Allgemeine Zeitung, cited by electrive, put it plainly: “Consumer prices are therefore unlikely to fall.” The decisive change, that paper argued, is distributional rather than absolute. Under duties, the wedge between the original price and the tariffed price flows to the EU budget. Under undertakings, the same wedge stays with the Chinese exporter.
Beijing’s counter-battery is still loaded
While the electric vehicle file inches forward, the retaliatory measures that Beijing built during 2024 and 2025 remain operative, and their trajectory tells its own story about calibrated pressure.
On pork, China’s Ministry of Commerce published its final anti-dumping determination on December 16, 2025, with duties of 4.9 percent to 19.8 percent taking effect the following day for five years. The final rates came in far below the maximum of 62.4 percent that had been floated during the proceeding. Most Spanish firms drew 9.8 percent, while Spain’s Litera Meat received the lowest rate at 4.9 percent, according to reporting by Euronews and Caixin Global. Spain, the Netherlands and Denmark are the most exposed suppliers. The commercial stakes have shrunk from their peak: EU pork exports to China topped 7.4 billion euros in 2020, when African swine fever had gutted Chinese herds, and have declined as domestic production recovered.
On dairy, the pattern of de-escalation-by-degrees is even clearer. MOFCOM announced provisional countervailing duties of 21.9 percent to 42.7 percent in December 2025. In its final ruling published on February 12, 2026, the ministry cut the range sharply to 7.4 percent to 11.7 percent, effective the following day for five years, as Global Times reported. A ministry spokesperson said the investigation had been conducted in accordance with Chinese law and WTO rules, had consulted all stakeholders, and had “reached an objective and fair conclusion.” Chinese analysts read the reduction as evidence of restraint rather than retreat. Li Yong, an executive council member of the China Society for WTO Studies, told Global Times that “unfair trade practices from the EU have affected the Chinese dairy sector.” Jian Junbo, director of the Center for China-Europe Relations at Fudan University’s Institute of International Studies, argued in the same report that Common Agricultural Policy support “created an unfair competitive advantage” that pushed surplus output into international markets, and added that “the relatively lower subsidy rates reflect that the investigation authority, in its ruling process, fully considered the concerns of all parties, including EU companies.”
On brandy, the template Beijing chose is the one Brussels is now copying. Anti-dumping duties of up to 34.9 percent took effect on July 5, 2025 for five years, but 34 named companies, including the houses behind Rémy Martin, Hennessy and Martell, were exempted on condition that they sell in China at or above agreed minimum prices. Rémy Cointreau, Pernod Ricard and LVMH’s Hennessy were all among the producers that signed up, according to reporting by The Drinks Business and Just Drinks. The minimum prices themselves were never disclosed. That opacity is a live issue for the EU mechanism, where the Commission has committed to a rules-based methodology but has not published the actual floor accepted for the CUPRA Tavascan either.
A new dispute contaminates the old one
The week before the Goldman note, the relationship acquired a fresh irritant with implications for every subsidy proceeding on the books. On August 19 and 20, China’s Ministry of Justice, acting with the Ministry of Commerce and other agencies, found that the European Union’s cross-border investigation into JD.com under the Foreign Subsidies Regulation constituted unlawful extraterritorial jurisdiction, and issued a directive instructing domestic entities not to carry out or support the inquiry. The EU probe, opened in depth in May 2026, concerns JD.com’s roughly 2.5 billion dollar bid for the German electronics retailer Ceconomy, parent of MediaMarkt and Saturn, and examines alleged preferential financing, tax relief and grants from bodies linked to the Chinese state. Beijing said it would take countermeasures if Brussels insisted on the wrong course, according to the ministry’s own English-language statement and reporting by the South China Morning Post and Global Times.
The significance for the trade defence file is structural rather than sectoral. Price undertakings depend on verification. The Commission has told exporters that offers must be enforceable and monitorable, and it has reserved the right to reinstate duties retroactively where milestones are missed. A blocking order that discourages Chinese entities from cooperating with EU information requests, even in a merger context rather than a trade remedy one, raises an obvious question about how Brussels will audit compliance with confidential price floors, volume caps and investment schedules inside China.
The arithmetic behind the October deadline
The political container for all of this is a timetable agreed on June 29, 2026, when the EU’s trade chief and Chinese commerce minister Wang Wentao set an October deadline for tangible results and established four workstreams covering trade and investment balancing, export controls, intellectual property rights and WTO reform. The deadline is aligned with the European Council meeting of October 15.
The imbalance driving that urgency is large and growing. The EU has framed the exercise around a goods deficit with China of roughly 360 billion euros. Goldman’s data show the quarterly picture deteriorating rather than stabilising: the bloc’s goods trade deficit with China widened to 98 billion euros in the first quarter of 2026, the widest since the third quarter of 2022, while Chinese exports to the EU rose about 16 percent in the first five months of the year.
Goldman nonetheless expects restraint. European officials rely on China for more than 90 percent of the bloc’s rare earth elements by weight and therefore “have incentives to preserve access to the Chinese market and avoid significant retaliation,” the economists wrote. Their bottom line: “We therefore expect EU policy to become tougher, but to stop short of measures likely to trigger a severe response from Beijing.” A United States style blanket tariff, in the bank’s assessment, remains unlikely.
Localisation is doing what tariffs alone could not
The most durable adjustment is happening in factories rather than in negotiating rooms, and August produced a notable data point. Speaking at Geely Automobile’s first-half results conference on August 17, new chairman An Conghui said the group intends to build higher-priced models from its brand portfolio at Volvo Cars plants in Europe from 2028, with electrive reporting on August 18 that Zeekr and Lynk and Co vehicles are candidates for lines in Belgium, Sweden and Slovakia. The logic is straightforward: cars assembled inside the customs union owe neither the countervailing duty nor a minimum import price. For Volvo, the arrangement addresses spare capacity at a difficult moment, with second quarter 2026 revenue down 17 percent and operating profit roughly halved year on year, according to the same report. Geely and Ford separately plan two battery electric sport utility vehicles in Valencia from 2028.
Geely is not alone. BYD’s roughly 4 billion euro plant at Szeged in Hungary is scheduled to begin assembly in the fourth quarter of 2026, starting with the Dolphin Surf, and executive vice-president Stella Li has said the company aims to build all its European electric vehicles locally by 2028. Chery is preparing its first European assembly in Barcelona with Spain’s EV Motors, and XPeng has partnered with Magna International in Austria.
Bruegel’s warning is worth holding alongside these announcements. García-Herrero and Gros argued that shifting from duties to undertakings raises the margin on exporting from China and therefore reduces, rather than increases, the incentive to manufacture in Europe. If they are right, every additional accepted undertaking slightly weakens the localisation pressure that the tariffs created, which is precisely why the Commission has bolted investment milestones onto the price floors.
What importers and exporters should do now
For companies moving goods between the two blocs, four practical conclusions follow.
First, do not plan on the duties disappearing. Seven months after the guidance document, one undertaking is in force and the 7.8 percent to 45.3 percent range still applies to everyone else. Landed cost models for 2027 should assume duties as the base case and treat an undertaking as an upside scenario that arrives model by model.
Second, treat the undertaking route as a compliance programme, not a tariff exemption. The Volkswagen (Anhui) precedent bundles a price floor with volume caps and investment milestones, all subject to retroactive duty reinstatement on breach. Distributors and dealer groups handling exempted models need contractual visibility into resale pricing and channel discipline, because cross-compensation across models or markets is explicitly in scope.
Third, agri-food exporters should read Beijing’s pattern rather than its peaks. In both pork and dairy, final duties landed far below provisional or threatened levels, and in brandy an entire tier of producers bought exemption with a pricing commitment. Firms facing Chinese trade remedy proceedings should assume that a negotiated price undertaking is a live option and prepare the cost documentation to support one.
Fourth, watch scope creep, not just rate levels. The measures most likely to reshape sourcing over a five-year horizon are the proposed plug-in hybrid tariffs and the CBAM extension into machinery, electrical equipment and transport gear, the latter with an implementation date Goldman places no earlier than 2028. Those touch far more supply chains than passenger cars do, and they will require carbon accounting capability that most tier-two and tier-three suppliers do not yet have.
The October summit will not close this file. The realistic best case is a package that trades a handful of additional electric vehicle undertakings and some Chinese movement on export controls against European restraint on new instruments. The realistic worst case is that the blocking order over JD.com hardens into a general refusal to cooperate with EU subsidy verification, at which point the undertaking mechanism becomes unadministrable and Brussels falls back on the tariff wall it never actually dismantled.