Šefčovič takes a one-sector car pilot to China to curb its surge of hybrid exports

The October 2024 tariffs are the only test on record of how China responds to a measure aimed at one product type. They covered Chinese electric vehicles. Hybrids were not subject to them, and exports of hybrid cars boomed ^[6]. The Guardian puts this down to China's historic ability to pivot quickly any time trade barriers are put in its path ^[6]. The report does not say how far battery-electric shipments fell after the duties, so the evidence shows exports moving into hybrids without showing whether total car shipments dropped.

A pilot drawn around cars as a sector widens the target. In principle it would put hybrids and battery models under the same terms, covering the hybrid trade that sat outside a tariff on one powertrain ^[11]. The trade-off is scale. Beijing's record trade surplus runs at £1bn a day, according to the Guardian ^[1], or about £365bn a year at that rate ^[18]. The pilot covers one sector of it, as a "proof of concept" that could be scaled up for others in the coming months ^[11]. The joint Franco-German paper lists automotive alongside pharmaceuticals, aerospace, machine tools and chemicals among the sectors hit by "a massive industrial shock" ^[9].

Andrew Small, Asia director at the European Council on Foreign Relations in Berlin and a former EU adviser on China, said the talks will "determine whether China is willing to put sufficiently serious offers on the table" ^[12]. He also warned: "China's most effective tactic may be to draw Europe into a 'process trap' offering just enough to delay action, without addressing the forces driving European deindustrialisation" ^[13]. I think Small names the strongest objection to a pilot, and the EU's answer to it is timing. Diplomatic efforts began at the end of June with little hope that China would curb exports ^[16]. If the car deal yields little by next week, leaders in Brussels are left weighing the quotas the EU has already threatened ^[7].

The mood in the talks has changed as member states harden their demands for protection, according to sources cited by the Guardian ^[17]. Sources also say the Franco-German "kill switch" grew out of frustration, particularly in Paris, that the anti-coercion instrument has never been used ^[3]. The joint paper called for a new diversification instrument and "possible additional" measures as well ^[10]. Handelsblatt called Merz's move "nothing less than an economic turning point" ^[14]. Its chief political reporter, Martin Greive, wrote that Merz was "putting an end to years of naiveté towards Beijing" ^[15].

The 2024 episode is one case. It supports caution about measures aimed at a single product type, without proving that a sector-wide deal will fail. For car and parts makers, the near-term question is how much China puts on the table in talks scheduled to run late into Friday ^[2]. The longer question is whether a negotiated limit on one sector holds against an exporter that moved into the untariffed product the last time Brussels drew a line around one type of car ^[6].