Art of the Deal
January 12, 2026
Alex KiersteinEurope and China strike a deal on EV imports, because China has made itself indispensable to an ecoconscious EU.
Europe’s EV conundrum has a few different layers, but the broadest is this: it has lashed itself to the mast on its quest for an EV transition from a policy standpoint. (At least mostly; European automakers have backed off of strict EV pledges, but EV market share will need to increase to hit bloc emissions targets.) Chinese EVs offer great value, and as we’ve seen of late, are also at or above parity with many of their non-Chinese equivalents. And in addition to the labor cost advantages Chinese automakers have, there are also significant government subsidies that, the EU argues, unfairly undermine the bloc’s competitiveness. The solution so far has been tariffs, but a new agreement reached between the EU and China will use minimum import pricing instead. (The text of the agreement is available on this page.)
The process works like this: An importer of Chinese EVs to the EU would submit a UT, an “undertaking offer.” This offer, essentially what is intended to be imported and at what price, is then weighed against a few different factors by the EU commission:
- Avoiding cross-compensation; in other words, proving that the importer won’t just lower the price on a different product to offset the minimum price on the UT offer.
- Minimum import price; must be sufficient to offset the subsidies.
- Annual volume; ensuring that enough units are sold at the agreed upon price that it doesn’t have the effect of cross-compensation. (Think: loss-leader.)
- EU sales price; must be reasonable.
- EU investment; the commission will consider verifiable future investment in the EU.
The agreement is predicated on the EU’s existing WTO-based anti-subsidy regulations, but based on the description in the document (which is a guidance document that is to be provided to potential importers) it seems like it will be at least partially subjective. That said, it’s a framework at least, and gives a more targeted solution to the problem of subsidized EVs than the broad brush of tariffs.
There’s a fair bit of hand-wringing in the automotive media covering this about how it may increase consumer costs, but there’s nothing in the guidance that necessarily implies that these agreed-upon prices will be more costly to consumers than tariffs. That said, if Chinese EV makers are not passing tariff costs onto consumers, as the Centre for Economic Policy Research argues in an interesting piece that runs contrary to much of the EU’s rationale here, then the minimum price agreement would likely increase prices overall.
Hopefully the EU commission evaluating these import submissions will be gathering data dynamically as it guides the EV market in Europe into a “soft landing,” as ABC News quotes the China Chamber of Commerce to the EU.
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