New Year's Day saw the long-standing China-EU trade dispute over electric vehicles finally take a turn for the better, with signs of resolution emerging. However, at this critical moment, the EU announced a move that struck China from behind.

Chinese electric vehicles

Recently, both China and the EU officially announced that the years-long trade dispute over electric vehicles has finally reached a "soft landing," with the EU willing to replace high anti-subsidy duties with a price commitment mechanism to keep the Chinese automotive industry in the European market. After multiple rounds of negotiations, the effort proved fruitful, and it seemed as if the issue would be resolved smoothly.

However, at this crucial moment, representatives of the 27 EU countries voted to approve a historic agreement, deciding to sign a free trade agreement with the Southern Common Market. The two sides finalized the signing on January 17. The problem is that since the negotiation began in 1999, the agreement has been repeatedly stalled due to tariff disputes, intellectual property protection, climate issues, and especially strong opposition from agricultural powers within the EU.

The breakthrough of the free trade agreement at this time is certainly not a coincidence. Analysts believe that the intention behind it is clearly targeted at China. Today's European economy is facing the dilemma of sluggish growth and challenges to industrial competitiveness. Trump's tariff threats and the ongoing turmoil in global supply chains have put the EU, which heavily relies on foreign trade, on edge.

EU

Under such "internal and external pressures," the free trade agreement with the Southern Common Market (MERCOSUR) was given dual expectations of being a "stabilizer" and a "new engine." The agreement will cover more than 700 million people, eliminating tariffs on over 90% of goods between the two sides, and is expected to save European exporters about 4 billion euros annually.

More importantly, Brazil, Argentina, Uruguay, and Paraguay possess vast markets, key minerals, and agricultural products that the EU urgently needs. Signing the agreement is a defensive choice by the EU to open up a "strategic backup" space when traditional markets become uncertain.

French farmers protesting strongly

If the economy is a chronic illness, then the U.S. military action in Venezuela has brought an acute "strategic shock" to the EU. For the EU, this means that if they don't act now, the future economic landscape and rule-making power in Latin America may be dominated by U.S. unilateral actions.

In terms of countering China, the EU and the U.S. share some strategic alignment. The EU can expand its exports of cars and machinery to MERCOSUR through the free trade agreement, competing with China in the South American market; at the same time, the EU can control parts of MERCOSUR's strategic resource supply chains through investment and technological cooperation, reducing reliance on China's supply chain.

Although the China-EU electric vehicle dispute achieved a soft landing, the EU has not abandoned its efforts to counter China's industrial chain. For the EU, this is both a reluctant response to U.S. trade protectionism and an active strategy to counter China's influence and compete for global supply chain leadership. However, whether the free trade agreement can be implemented smoothly remains uncertain.

Southern Common Market

The passage of the agreement itself was a "narrow escape" despite strong opposition from agricultural powers like France and Poland. Although the EU Commission proposed hundreds of billions of euros in farmer aid funds and a series of safeguard measures to calm the opposition, the wave of protectionism has not subsided. The French government has clearly stated that it will continue to "fight" during the upcoming European Parliament approval phase.

The EU-MERCOSUR free trade agreement is far more than just a commercial contract. It is a strategic breakthrough made by the EU in an era of global power restructuring. Its intention is threefold: easing internal economic pressure, preventing the spillover risks of U.S. unilateralism, and, in the long-term competition for global influence with China, opening up a "Western front."

Original article: toutiao.com/article/7594730380482183732/

Statement: This article represents the personal views of the author.