In 2024, the EU introduced additional tariffs (up to 35% on top) on electric vehicles imported from China, on the grounds that these carmakers benefit from subsidies that enable them to sell at very low prices, to the detriment of manufacturers that produce their vehicles in Europe. To widespread surprise, on Monday 12 January, the European Commission raised the possibility of introducing a "price floor" (or "minimum price") clause, which would enable manufacturers producing in China (whether Chinese or not) to offer minimum prices for their vehicles as an alternative to these tariffs.

The Commission says that the minimum price must be set in such a way as to "eliminate the harmful effects of subsidies and produce an effect equivalent to tariffs". Its application also appears to depend on other conditions (investment, etc.) that have not yet been detailed.

While playing down the "advance" for Chinese producers, the European Commission nevertheless said this option should not be interpreted as a guarantee that the additional tariffs will be lifted.

A Chinese trade surplus that keeps growing

In 2025, China’s trade surplus reached nearly $1,200bn. Up 20% in a year, it has tripled since 2019. These figures clearly show that the yuan is artificially undervalued: in theory, such massive and lasting trade surpluses should lead to a natural appreciation of the currency, unless the authorities intervene to keep it weak, as China does by pegging the yuan to the dollar.

In the automotive sector, mainly in EVs (electric vehicles) and hybrids, China’s exports (it has been the world’s leading automotive exporter since 2023) rose by 21.4% in 2025 alone.

The explanation for this Chinese wave? Production costs 30% to 40% lower than those of European manufacturers thanks to a technological lead in electric vehicles (the result of massive past subsidies), production and export subsidies still in place, massive overcapacity (leading to degraded selling prices in which almost all players are unprofitable) and, as we have already mentioned, a competitive devaluation of the yuan. So many factors that make any competition simply impossible.

The strategy is simple: subsidise, flood the market, kill off competition, then withdraw support once a monopoly is secured (underway in solar panels and planned for batteries) and reap the rewards of the investment within a monopoly that is continuously extended to new sectors, with no intention of respecting WTO rules.

Europe: the only one still playing by WTO rules that have become obsolete

Whether under Biden, who, let us recall, simply banned Chinese vehicles from the United States, or under Trump, with his outsize tariffs, the United States deserves credit for tackling the problem head-on.

At the same time, the United States and China are doing everything they can to diversify their sources of raw materials and to regain autonomy across all strategic sectors, without bothering about compliance with any rules (neither WTO rules, nor even property rights in China’s case). The question is not whether this is fair; it is to recognise it and act accordingly, without naivety.

The reality is that Europe is now the only one that continues to promote and adhere to WTO rules. But when you are alone in applying the rules (and therefore imposing constraints on yourself), you are guaranteed to lose the battle. The world has changed; we have unfortunately returned to a world of conquering empires. And in that world, Europe, which still has strengths, can only survive if it changes its model, asserts its power through a balance-of-power approach, and also becomes autonomous in strategic sectors. And that, unfortunately, rules out respecting WTO rules that have become obsolete.

Consequences if the "price floor" clause is applied without limits (restrictive quotas)

This "price floor" approach would only enrich Chinese manufacturers, giving them new margins to innovate or to engage in even more aggressive dumping elsewhere in the world. This added competition would further suffocate European manufacturers not only in Europe (because popular pressure will demand ever-lower "price floors" and Chinese officials will leverage rare-earth deliveries to get their way) but also elsewhere in the world.

This approach would also push European manufacturers and suppliers to produce in China to restore their squeezed margins (see the case of Renault, or Cupra (Volkswagen), behind the first request for a "price floor" to the European Commission), or even to design their vehicles in China (this is being discussed for several European manufacturers). The consequences: a transfer of production, engineering and the entire value chain from Europe to China.

European manufacturers’ margins would be preserved for a while. Long enough for European suppliers and chipmakers to disappear from European soil. Then China would have free rein to put obstacles in the way of European brands and favour its own carmakers, and that would be the end of Europe’s automotive industry and its entire value chain (chips, equipment, etc.).

The automotive sector is the backbone of European industry, around which an entire ecosystem of mid-sized firms and SMEs revolves. If the sector is destroyed, a large part of European industry will disappear with it.

Applying a "price floor" also means cutting off revenues from tariffs, which could/should be used to support the affected sectors in Europe to produce in Europe.

Beyond the sectors directly affected (and there are many), if this "price floor" clause is ultimately adopted (and if it is not paired with strict quotas), it will obviously be used as a "model" for other strategic sectors, with the same consequences.

Remember that Europe, the world leader in solar at the start of the 2000s, lost its entire industry in less than a decade, due to a lack of protection. As early as 2010, China already controlled 80% of the market. The risk is real that the automotive industry and its entire associated value chain will suffer the same fate if Europe does not protect its interests.

A "local content" clause to encourage all players (European and foreign) to produce in Europe

On January 28, the European Commission, via Stéphane Séjourné, the commissioner in charge of "Industrial Strategy", is due to specify the minimum level of local content required for vehicles produced and sold in Europe. Conditions that, unless the "price floor" clause applies only to very limited quotas, appear difficult to reconcile with the "price floor" clause, which by definition applies to imported vehicles with little or no local content.

Overview of the positions of the various players by Gaétan Guillemot (CEO of "BeLink Solutions" and co-founder of the LinkedIn group "Automobile France").

"Stellantis, with a strong warning about the need for concrete and urgent rules to revive investment in Europe, argues for 80% European local content across the entire manufacturing chain: stamping, body-in-white, assembly, but also 80% for engines and transmissions. The group goes even further by calling for 65% of engineering to be carried out in Europe, a particularly sensitive point for Asian manufacturers heavily reliant on R&D centres outside the EU".

"On batteries, Stellantis sets a clear course: 60% of cells produced in Europe by 2030, while current dependence on Asia remains massive (China still controls more than 70% of global cell production capacity, according to the IEA)".

Other manufacturers are not, however, on the same wavelength. "One can notably cite the case of Renault, which argues for an overall threshold of 60%, without including batteries, engines or engineering, and calculated as an average across volumes. A deliberate caution, notably linked to its production sites outside the EU (Turkey, Morocco) that supply the European market". To benefit from Chinese know-how and the ecosystem, Renault also set up an engineering centre in Shanghai in 2024-2025 and is considering producing some of its models in China. A worm in the fruit of "European strategic autonomy".

On the supplier side, "CLEPA (the European automotive supplier association) recommends a local-content threshold of 70% to 75% to preserve jobs, innovation and industrial sovereignty".

More broadly, the latest study by consultancy AgileBuyer, conducted among procurement departments at French industrial companies, delivers a worrying result. While a recent poll ahead of the Davos Economic Forum cites "Geo-economic confrontation" as the No. 1 short-term risk, AgileBuyer’s study indicates that "Dependence on China is no longer a concern" for procurement departments, with a "decline in the willingness to reduce dependence on China, falling from 43% of companies in 2025 to 17% in 2026 (11% in the automotive sector)". Likewise, the willingness to "reshore suppliers to France or Europe is collapsing", with "only 13% of companies asking their suppliers to reshore to France or Europe (11% in the automotive sector)".

The conclusion is unequivocal: if they are not forced to, European and foreign industrial players will continue to shift their French and European value chains to China or outside Europe. A strategy at odds with that of US manufacturers. One can notably cite General Motors, which recently ordered its suppliers to remove their supply chains from China and find alternatives, and Tesla, which required its suppliers to exclude parts made in China for its US vehicles*.*

But the debate goes beyond carmakers or industrial groups. Member states themselves are divided: "France and Italy are pushing for stronger local integration, while Germany remains more reserved, keen to preserve its industrial relationships with China".

In reality, beyond defining the level of "local content", implementing very restrictive quotas seems essential, as does a path for "local content" rates to reflect current realities and the target, with a local-content rate that increases over time.

Once one becomes aware of these trends and companies’ desire to produce in China (natural in order to protect their margins in the short term), it is obvious that keeping both clauses in parallel, without limiting the "price floor" clause through strict quotas, would strip the "local content" clause of all substance. It would result in an overall shift of the entire value chain to China because it will be more attractive for industrial players, whether Chinese or European, to produce and design faster and cheaper in China while preserving margins, once the "price floor" clause allows them to do so.

Without quotas, the industry is doomed to disappear from Europe. China would then only have to blow the final whistle for Europe, and for its industrial companies, which would then be at the mercy of arbitrary Chinese decisions. China, let us not forget, in its national narrative since 1949 dreams only of revenge against the West and the "Century of Humiliation" (1839-1949), during which it suffered under the yoke of Western colonial powers. Once it holds all the cards, China will show no leniency, that is certain.

Europe (and Germany) have more to lose in Europe by failing to protect themselves than in China by protecting the European market

If France and Italy appear aligned in favour of stronger local content, Germany remains more reserved. Yet, like Europe, it has more to lose in Europe by doing nothing than in China by embracing confrontation.

In 2024, Germany’s exports to China accounted for 5.9% of German exports, behind the United States, France, the Netherlands and Poland, and probably by 2026 behind the United Kingdom, Italy, Austria and Switzerland ! A figure that declines year after year; by the end of September 2025, German exports were down more than 12% compared with the same period in 2024.

That 2024 figure (5.9%) should be compared with Germany’s exports to Europe (64.24%, including the UK’s 5.3%).

Finally, in automotive terms, while China represents up to 30% of German brands’ vehicle sales by unit volumes (a declining trend), those sales account for only 15% of their revenue (because vehicles are most often produced locally via joint ventures, 51% owned by Chinese partners) and with profitability in free fall. Here again, the figures should be compared with those same manufacturers’ revenues in Europe, which range between 40% and 60% depending on the company, with higher profitability.

Conclusion: contrary to what people think, China is not an important export market. Not even for Germany. In fact, Germany (like Europe) has far more to lose in Europe by doing nothing in the face of distorted Chinese competition than in China by embracing confrontation with China. The priority, in strategic sectors including automotive, is to ensure the durability of the entire value chain.

Conclusions

The situation has changed: vis-à-vis China, Europe is now the developing country and China the advanced nation. As such, Europe should now apply what China imposed in the past to gain access to its market.

More than imposing tariffs, which are inflationary, the solution for maintaining good price accessibility will likely lie instead in a set of coercive measures: strict quotas; high "local content" requirements that are gradually increased. In some cases, an obligation to go through JVs that are 51% European to access the European market, or even to impose technology transfers.

At the same time, the European Commission will likely have to further adjust its ambitions on CO2 emissions to allow manufacturers’ proposed solutions to better adapt to the reality of customer demand, an adaptability that is also required to ensure the economic sustainability of the transition.

It is no longer consumers who must be placed at the centre of the game, but producers. This is now a matter of survival (industrial, economic, social, political, military). Europe must become autonomous again. We see it with rare earths and Nexperia components: the more production Europe loses, the more it will be subjugated and dependent on the goodwill of the new empires (the United States and China).

Exposing oneself to China (by producing in China) also means exposing oneself to the loss of the US market, where one can sense, through GM and Tesla’s instructions, that the United States will soon ban the integration of components originating from China in order to sell on its market. If European manufacturers and suppliers begin producing all or part of their components in China, they risk being barred from access to the US market. For anyone seeking access to the US market, this is a strong message that should be heeded.

Finally, let’s be clear: if we want to avoid a conflict with the China-Russia duo (because it is, unfortunately, a possibility) and avoid being subjected, as a vassal, to the goodwill of the United States, we need a strong and autonomous Europe. It is not once we are totally dependent that we will be in a position of strength to negotiate. In this new world of empires where the law of the strongest prevails, Europe will simply be plundered if it does not organise itself while it still has the means to do so. And time is running out.

Ultimately, in the event of conflict (not impossible), whether a "simple" currency and trade war or a military conflict with China, the companies that have managed to limit their dependence on China will be best equipped to survive.

In an age of empires, power politics and strategic autonomy. At a time when "Geo-economic confrontation" is considered the No. 1 short-term risk (Davos Forum). At a time when China does not hesitate to use our dependencies (rare earths, Nexperia) to impose its views, and when the question is no longer whether China will take possession of Taiwan but when it will do so, the only solution is to impose a high level of local content (production within the European Union, excluding countries with which the EU has free-trade agreements), with a rate of at least 75%.

To survive, Europe has no choice but to embrace a balance of power with China because it has far more to lose in Europe by remaining open than in China by entering into confrontation.

Thus, the paradigm is no longer about operational optimisation within the "happy globalisation" in which Germany, like a number of European industrial players, seems to take comfort, but about strategic autonomy.

China has never respected and will not respect the rules of the game. It will systematically favor its companies. The idea is not to reproach them for it, but rather to copy them. What they do, we should do. Without naivety and without forcing ourselves to respect WTO rules (that no one respects any more anyway). While it may be appropriate to maintain our respective positions (European companies in China and Chinese companies in Europe) in a logic of status quo and reciprocity, the parallel task is to de-risk vis-à-vis China-not to continue transferring our sectors there by increasing our dependencies.

Outside China, while it is appropriate to forge "free trade" partnerships with key regions (India, Mercosur, South-East Asia, Turkey, etc.), Europe must in parallel ensure it is autonomous in strategic sectors, including automotive.

In these sectors, Europe must defend the European market (its rear base) and, to stay in the international race, either lower the euro against other currencies or introduce partnerships to produce "local for local" with targeted countries (India, Mercosur in particular) and ensure, with them, that they protect their own markets from Chinese dumping with similar rules, in a logic of regionalising globalisation.

If implemented, the "price floor" clause must be limited with strict quotas. Otherwise, it will strip the "local content" clause of all substance.

"Local content" clauses, which must not include countries with which Europe has signed or will sign free-trade agreements (Turkey, North Africa, Mercosur, India), combined with quotas and a formal "Buy European Act" (or a "European preference"), are a necessary but insufficient must-have to save European industry from Chinese production in particular, but also Korean and Japanese production, which has also been using the lever of competitive devaluation since 2025 to gain market share in Europe and internationally-at least, that is the message reportedly recently conveyed by Scott Bessent to those two countries.

In the case of Chinese brands, mirroring their past practices, the idea would be, in addition, to require the creation of JVs that are 51% European and technology transfers in order to access the European market.

The survival of European industry is at stake.

An opinion by Stéphane Faure, director of Astyrian Patrimoine