EU members are discussing ways to slow down imports of Chinese electric vehicles. That is why they are talking about stronger protection measures to save uncompetitive European car manufacturers. The trade war between the EU and China may become even fiercer in the near future.

China has emerged as the global leader in electric vehicle production, benefiting from significant investments and advances in battery technology. American and European automakers have been facing increasing competition from China. Chinese electric vehicle (EV) manufacturers have an increasing appeal to consumers in North America and Europe as they often offer lower prices and rapidly expanding model ranges.

The EV tension has come on top of the existing trade wars, with the U.S. and Europe on one side and China on the other. European manufacturers in almost all tradable goods sectors have been complaining about increasing Chinese competition ever since China’s opening to world trade in 1978.

The welfare effects of Chinese integration into world markets have dominated the debate. Western consumers enjoyed increasing purchasing power of manufactured goods with any increase in their own productivity at home. The bonus came from low-salaried Chinese manpower who were also very hardworking. It was a win-win for both parties; Europe and the U.S. offered more and more consumables to their people without the latter having to work harder. For China, the newborn export dragon was an opportunity to provide relatively higher salary employment to its labor and thus increased welfare (which also bolstered obedience to the Communist Party) on the one hand. On the other, China received trillions of dollars of export revenues in hard currency over the last five decades and became the primary lender to the U.S.

Enriched China soon started to "buy out" high-debt countries in Europe (Portugal and Greece as well as Italy), Africa, Latin America and Asia. China’s political influence has been rising in tandem. Soon, the tensions started in the West. The governments in the U.S. and Europe have realized that growing trade deficits against China mean less employment and tax revenues on top of hard currency outflows. At the same time, their influence on their former colonies and elsewhere rapidly waned. More importantly, European and many American corporations could simply not compete with their Chinese counterparts. European and American governments soon started to pull the trigger by strengthening the protection policies. All this led to ever-rising tensions around trade policies, including tariffs and subsidies.

The European Union has been assessing ways to support its domestic car manufacturers in leveling the playing field in the automobile sector. Both Europe and China are investing heavily in R&D for EV technology. The top agenda item here is battery technology, the weakest aspect of electric vehicles. This race for innovation is the key to their respective strategies to dominate the EV market. However, it seems Europe will be unable to cope with the Chinese innovative power. That makes government help a necessity for European EV manufacturers to survive.

European authorities also use the handy tool of regulatory standards and environmental practices in their arsenal. European regulations aimed at reducing emissions are evolving, and there are discussions about aligning standards with global practices. These non-tariff (or "ghost") barriers have been common practice in the political toolkit of the EU in erecting the "Fortress Europe," which symbolizes a European domestic market that is supposed to be open to competition internally but protected forcefully against outsiders like China.

Thus, the EV crisis between China and Europe primarily revolves around competition, market access and regulatory standards. The natural route seems to be an ever-hardening economic war between the two parties. The results of the U.S. elections will also have a bearing. If Donald Trump wins the U.S. elections, China will have to fight on two fronts and things may turn more nasty.