China and the European Union have reached a provisional agreement on measures to address tensions over electric vehicle imports, signaling a potential de-escalation in a trade conflict that has impacted global auto markets. The deal includes phased adjustments to tariffs and new transparency protocols for market access.
- EU suspends proposed tariffs on Chinese EVs (17.0%–35.3%) for 12 months
- Chinese EV exporters agree to a 10% cap on export pricing to the EU
- Joint monitoring mechanism with quarterly reporting to ensure compliance
- Affects 42% of Chinese EV exports to the EU in 2024 (BYD, Xpeng, NIO, SAIC)
- MSCI Europe Auto Index up 2.3%, CSI 300 up 1.8% on market reaction
- Projected 6.7% YoY growth in EU EV imports from China in H1 2026
China and the European Union have finalized a framework agreement to resolve their ongoing dispute over electric vehicle (EV) imports, according to official statements released on January 12, 2026. The agreement marks a pivotal shift after months of escalating trade tensions, during which the EU had proposed tariffs ranging from 17.0% to 35.3% on Chinese-made EVs, citing concerns over unfair subsidies and market distortion. Under the deal, the EU will suspend the implementation of proposed tariffs on Chinese EVs for a 12-month period, during which both sides will implement a series of confidence-building measures. These include establishing a joint monitoring mechanism to assess pricing and subsidy levels, with quarterly reporting requirements. Chinese EV exporters will also commit to a 10% cap on export pricing to the EU market during the transition period, a figure derived from baseline data collected from 2023–2025. The agreement affects major automakers including BYD, Xpeng, NIO, and SAIC, which together accounted for approximately 42% of Chinese EV exports to the EU in 2024. The EU’s automotive sector, particularly manufacturers such as Volkswagen and Stellantis, will benefit from a stabilized supply chain while also facing increased scrutiny over their own production subsidies under the new oversight framework. Financial markets reacted positively, with the MSCI Europe Auto Index rising 2.3% and China’s CSI 300 Index gaining 1.8% on the news. Trade volumes are expected to stabilize in the first half of 2026, with EU import data showing a projected 6.7% year-on-year growth in EVs from China once the agreement takes full effect.