Beijing: When the European Commission imposed countervailing duties of up to roughly 35 percent on Chinese electric vehicles in October 2024, few in either capital expected the standoff to drag deep into 2026. Yet the slow thaw now taking shape says more about the limits of economic coercion than about any genuine reconciliation. Brussels and Beijing have spent more than a year circling a compromise built not on rolled-back tariffs but on minimum import prices, a mechanism that lets each side claim victory while conceding that the core dispute remains unresolved.
The logic of the price-undertaking approach is revealing. Tariffs raise revenue and signal resolve, but they also invite retaliation and lift costs for European consumers already wary of stagnant wages. A negotiated price floor, by contrast, raises the sticker price of Chinese models without handing customs receipts to the EU budget, allowing Chinese manufacturers to keep their margins rather than surrender them to European treasuries. That Beijing has pushed so hard for this structure tells you how much it values protecting the profitability of its export champions over the headline volume of cars sold.
Brandy is the hostage in this exchange. Within days of the EV vote, China opened an anti-dumping investigation into European brandy, a category overwhelmingly composed of French cognac and worth billions in annual sales to Chinese consumers. The targeting was surgical: cognac is a luxury concentrated in a single member state, making it a precision instrument for splitting European unity rather than a blunt tariff on goods sourced across the bloc. France, which championed the EV duties, would bear the cost; Germany, whose carmakers feared losing access to the Chinese market, could quietly nurse its grievances. The episode exposed a structural weakness of EU trade policy, that a tool wielded in the collective name is paid for by whichever capital is most exposed.
What makes the current truce fragile is that neither structural grievance has gone away. Europe still believes Chinese subsidies distort its market; China still regards the duties as protectionism dressed up as fairness. A price floor freezes the conflict rather than settling it, and it does nothing to address the deeper anxiety in Brussels that a generation of European industrial capacity could be hollowed out by state-backed competition. Nor does it reassure Beijing that the EV case will not become a template for actions against batteries, wind turbines or steel.
For European policymakers, the lesson is sobering. The bloc discovered that it can impose costs on China, but not without absorbing costs of its own and not without testing the cohesion that gives its trade policy any force at all. A durable settlement would require Europe to decide whether it wants cheaper decarbonisation or a protected domestic auto sector, a choice it has so far refused to make. Until then, brandy and electric cars will keep riding the same uneasy truce, each a bargaining chip the other side can seize the moment goodwill runs dry.
