China and EU seek to avoid trade war with talks on minimum EV prices

BERLIN — Brussels and Beijing are engaged in intense 11th-hour negotiations on Chinese electric-vehicle subsidies, raising hopes in Germany that EU duties — and a wider trade war — can still be avoided, officials familiar with the talks said.

The discussions are an attempt to solve an ongoing dispute over Beijing’s subsidies for Made-in-China EVs, which the EU says are artificially lowering prices and making it impossible for its own industry to compete.

Under discussion is the idea of setting voluntary minimum prices that would offset the market-distorting Chinese subsidies, thereby rendering the planned EU duties moot. One official described the concept as a “surcharge“ that would balance out the Chinese state aid.

A meeting between Chinese Commerce Minister Wang Wentao and EU trade chief Valdis Dombrovskis last week failed to reach a breakthrough. But the European Commission did unexpectedly offer the Chinese a second chance to propose a solution, using legal exceptions to stretch a deadline that expired in late August.

Two people briefed on the negotiations told Berlin Playbook that Chinese representatives had stayed back in Brussels to continue negotiations for a deal which would avoid EU duties on electric cars.

The Commission declined to comment.

The continued talks are raising hopes in Germany — which has strongly opposed the imposition of EU tariffs for fear of Beijing’s wrath, and has unsuccessfully tried to lobby against them — that a tit-for-tat trade war with China can be avoided.

If the two sides cannot come to an agreement, the EU is poised to impose heavy tariffs in a bid to prevent the market from being flooded with cheap cars.

One Chinese industry official confirmed negotiators had remained in Brussels, but was unable to sketch out how receptive the European Commission had been to Beijing’s ideas since Thursday.

Before Wang’s visit, the Commission rejected a first Chinese offer on minimum prices, but left the door open to further negotiations by saying it wasn’t “up to us to be prescriptive” on how such a scheme should look. That first proposal, the Commission said, failed to cancel out the Chinese subsidies sufficiently and also had issues on how to enforce the pricing.

Germany has fought a rearguard action against imposing EV duties for months, but has so far failed to win enough allies among EU member countries to sway Ursula von der Leyen’s Commission as it gets tough on trade with China.

With a final vote to confirm the duties — of up to 35 percent — potentially just days away, the last off-ramp for Berlin would be a negotiated settlement. Germany, on paper at least, lacks the necessary supermajority to block the tariffs in the Council, the intergovernmental part of the EU.

The European Commission last year launched an anti-subsidy probe that found Beijing was unfairly propping up its electric vehicle industry. Beijing has retaliated with its own anti-subsidy probes into EU exports of pork, brandy and dairy.

Koen Verhelst contributed to this report.