In a report by Reuters, the European Commission (EU) announced its intention to impose tariffs of up to 38.1% on Chinese electric vehicles effective July. The commission specifically cited concerns over what it deemed as "excessive subsidies."

This decision, mirroring recent actions taken by Washington, has stirred apprehensions about escalating trade tensions between the EU and China. While Chinese officials downplay the potential consequences, European automakers express worries about possible retaliatory measures, resulting in a sharp decline in stock prices. 

READ NEXT: Volvo to Move EV Production to Belgium From China as EU Prepares to Impose Tariffs on Chinese EVs

China on EU's Tariffs

Earlier this week, as rumor of EU's tariffs on Chinese EVs went ahead, VCPost reported that Beijing is ready to retaliate, but did not mention how. Considering that this move is a notable departure in EU trade strategy, a growing trend toward protectionism within a critical sector, China will most likely depart from the way they do business with the European Commission states as well.

For now, European automakers are bracing for potential retaliatory measures. Volvo has already moved its EV production to Belgium from China to avoid being caught between the EU's tariffs and China's impending strategy.

Similar to escalating US-China relations, this could also strain the relationship between China and the EU, potentially escalating into a full-blown trade dispute. China already perceives these tariffs as protectionist measures and the EU's potential to block future trade negotiations and cooperation between the two economic powers could have far-reaching implications, impacting various sectors beyond the automotive industry. 

READ MORE: China Warns EU About Its Chinese EV Tariffs; Beijing Says It's Ready To Retaliate