The Unexpected Consequences of EV Tariffs: Between Reality and Illusion of European Automotive Industry Strategic Autonomy

The Limitations of Tariffs: The Real Effectiveness of Europe’s Electric Vehicle Industrial Policy

Since the anti-subsidy investigation was launched in October 2023 and tariffs were formally implemented in 2024, the EU’s trade measures against Chinese-made electric vehicles have been in effect for nearly two years. According to the latest analysis by Transport & Environment (T&E), these tariffs have played a partial role in reshaping the geographical distribution of supply chains—but they are far from a complete victory.

Divergent Impact of Tariffs

Data shows that in the first quarter of 2026, the share of Chinese-made battery electric vehicles (BEVs) in the EU market fell to 17%, down from a peak of 22% in 2024. This is largely due to Western brands such as Tesla, BMW, and Volvo relocating production from China back to Europe. However, Chinese brands reacted quite differently: BYD, under a relatively low tariff rate of 17%, doubled its BEV exports to Europe within two years; while SAIC Motor, facing a high tariff of 35%, saw its export volume nearly halve.

More notably, Chinese-brand BEVs are still 21% cheaper than comparable European-made models in the EU market, meaning tariff-induced price competitiveness has not been fully offset. At the same time, Chinese automakers have quickly adjusted their product mix: the market share of plug-in hybrids (PHEVs) jumped from 3% in 2024 to 13% in the first quarter of 2026, cleverly bypassing some trade barriers.

Batteries: The Next Battleground

A clear policy vacuum in the tariff system concerns batteries. Batteries produced in China are almost unaffected by tariffs, and their exports to Europe have surged sevenfold between 2020 and 2025. EU domestic battery manufacturers—of which European companies account for less than a quarter of output—are facing a survival crisis. T&E estimates that a 20% tariff on imported batteries would only raise the average price of EU-made BEVs by 2.8%, while creating breathing room for the local battery industry.

This data reveals a structural flaw in the current trade defense: the EU has protected vehicle assembly but neglected the more strategically valuable battery supply chain. If Chinese batteries continue to flow in tariff-free, Europe may effectively become an "assembly workshop" rather than achieving true technological autonomy.

Trade-offs Between Strategic Autonomy and Green Goals

Another concern with tariffs is that they could undermine the EU’s own climate targets. T&E predicts that if the CO₂ targets were weakened as proposed by some MEPs, the share of Chinese brands in the EU EV market would rise to 30% by 2035 (compared to 15% under the current proposal). This creates a policy contradiction: weaker emission reduction targets expand the space for Chinese brands, while stronger targets help nurture the domestic market.

Chinese automakers are also actively localizing production to circumvent tariffs. Since the European Commission President announced the anti-subsidy investigation in September 2023, Chinese carmakers have announced 10 plans to build factories in Europe. If these investments materialize, they will change the competitive landscape—but may also present the EU with a new scenario where production is not by Chinese brands but is dominated by Chinese-led manufacturing.

Policy Lessons: From Tariffs to Building an Industrial Ecosystem

• The policy recommendations put forward by T&E reflect a more systematic approach:
• Extend trade defense to batteries to prevent value chain outflows;
• Close loopholes that allow circumvention via third-country transshipment;
• Accelerate the adoption of the EU Industrial Accelerator Act and corporate fleet regulations to create domestic demand for EVs;
• Maintain the 2030 and 2035 automotive CO₂ targets unchanged.The policy recommendations put forward by T&E reflect a more systematic approach:
• Expand trade defense to the battery sector to prevent value chains from shifting overseas;
• Close loopholes that allow circumvention via third-country transshipment;
• Accelerate the adoption of the EU Industrial Acceleration Act and corporate fleet regulations to create local demand for electric vehicles;
• Maintain the 2030 and 2035 automotive CO₂ targets unchanged.

These measures indicate that tariffs alone cannot solve the competitiveness issues of the European electric vehicle industry. Subsidies, infrastructure, regulations, and trade policies need to work in synergy to sustain the pace of the green transition in an era of strategic autonomy.

Long-Term Perspective: The European Automotive Industry at a Crossroads

Current data paints a complex picture: tariffs have successfully prompted some capacity to return, but the market presence of Chinese brands is still expanding, and weaknesses in the battery segment may cause Europe to rely on Chinese supply chains in the future. If Europe wants to avoid becoming a low-cost assembly base, tariffs must be part of a broader industrial strategy rather than a standalone solution. The balance between green objectives and industrial protection will be key to determining whether Europe can remain competitive in the electric vehicle era.