Nomura Asia Insights: EU-China Trade Tensions — The Slow Burn Accelerates
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Key Views
The EU applied anti-subsidy duties on Chinese BEVs in 2024 but excluded PHEVs. Chinese PHEV exports to the EU consequently surged roughly 302%, from about 42,600 units in 2024 to roughly 171,300 in 2025, and approximately 97,400 units in January–April 2026 (up about 130% YoY). China's share of EU PHEV imports rose from 21.3% in 2024 to 63.0% in January–April 2026. Multiple EU measures are expected in Q3 2026, including steel safeguards, de minimis reform (effective July 1), chemical measures (expected September), and potential anti-subsidy duties on Chinese PHEVs.
China's retaliatory measures have been targeted but restrained, with final duties on EU pork set at 4.9–19.8%, well below preliminary rulings of 15.6–62.4%, preserving negotiation room.
Outlook
The EU-China Trade and Investment Consultation, launched June 29, sets October as the first results checkpoint. Nomura expects PHEV tariffs to become the next key battleground, while rare earths serve as China's ultimate deterrent. With the US trade deficit with China falling to USD 202.1 billion in 2025 — below the EU's USD 218.8 billion — the EU increasingly faces China-related trade challenges alone.