Beijing-EU tariff dispute unlikely to escalate significantly as China joins WTO, say analysts.

• The commerce ministry of China filed an additional appeal with the WTO against the EU's tariffs on its EVs because bilateral talks have not resulted in a breakthrough.
• According to Shaun Rein, managing director of China Market Research, the move is a "warning shot against Europe to demonstrate China's strength but not to overstep its boundaries."
• The EU has increased tariffs on Chinese EVs to a maximum of 45.3% after conducting an investigation for a year.

The dispute between Beijing and the European Union over tariffs on electric vehicles will not escalate, according to industry watchers, following China's request for resolution from the World Trade Organization the previous day.

The commerce ministry of China filed an additional appeal with the WTO against the EU's tariffs on its EVs because bilateral talks have not resulted in a breakthrough.

According to Shaun Rein, managing director of China Market Research, China's move is a "warning shot against Europe" to demonstrate its strength but not to overstep its boundaries. Rein predicts that China's response will be "measured" as it aims to maintain closer economic relations with Europe amid escalating tensions with the U.S.

The tariffs implemented on Wednesday have prompted both sides to consider establishing minimum price commitments from Chinese car manufacturers as an alternative. According to reports, the EU was responsible for more than 40% of Chinese EV exports in 2023.

Enhance International's Sam Radwan stated that China will make every effort to find a middle ground with the EU.

The China-EU dispute is unlikely to escalate to the same level as the Washington-Beijing spat, as the EU heavily relies on China in their EV value chain.

Beijing responded to the EU's tariffs on Chinese EVs by targeting European exports such as pork, dairy, and brandy products.

European trade officials are still in negotiations with Chinese counterparts, according to European Commission vice-president Maros Sefcovic, who told a parliamentary committee on Monday. He characterized China as the "most challenging trading partner" for the EU, stating that the bloc must be "more assertive in challenging China's structural imbalances and unfair practices."

Sefcovic stated that the EU is not interested in trade wars and is instead seeking to rebalance its relationship with China in areas where it feels the relationship is unfair.

In August, the EU faced a complaint from China under the WTO dispute settlement mechanism regarding the subsidy duties on EVs.

Eugene Hsiao, head of China Autos at Macquarie Capital, stated that China will "explore every opportunity to persuade the EU to reduce tariffs." If a lower tariff is reached, this could affect the amount of investment Chinese EV manufacturers would be willing to invest in local production in the EU.

Last week, Reuters reported that China urged its automakers to halt big investment plans, such as constructing factories in European countries that backed the tariffs. Instead, the automakers were "encouraged" to invest in countries that opposed the tariffs, according to the report.

In October, tariffs were supported by EU members such as France, Poland, and Italy, while five members, including Germany, opposed them.

Wang Wentao, China's commerce minister, urged France to actively participate in finding a solution that is acceptable to both the European and Chinese electric vehicle industries, as stated in the official readout of his meeting with French junior trade minister Sophie Primas on Sunday.

Wang was reportedly informed by Primas that the EU would maintain trade with China but would not give in to pressure on crucial matters.