China’s economy showed further signs of stagnation in July, according to delayed figures released from China’s National Bureau of Statistics on August 17. But one economic bright spot China’s government could point to was sales of Chinese electric vehicles (EVs) to western Europeans. 

According to data gathered by Schmidt Automotive Research over the first five months of 2026, sales of Chinese EV models in western Europe rose to 14.2 percent of total EVs sold between January and May. This means around one in seven EVs sold in the region were Chinese-made, despite significant EU tariffs on Chinese EV exports since 2024. Such tariffs are not replicated in the United Kingdom, accounting for some, but not all, of the recent surge in Chinese EV sales in many western European markets. 

Despite growing trade tensions between the EU and China, the uptick in sales is being driven by consumer responses to two factors: conflict and climate change.

Europe is having a record-breaking heatwave this summer. Soaring temperatures have brought drought, wildfires, and higher electricity bills for households and businesses as European demand for air conditioning rises. The rise in natural disasters and other fallout from climate change is causing mounting insurance costs and business losses across the continent. These changes are accelerating Europe’s move toward a greener economy as more households and firms buy heat pumps, solar panels and EVs to decarbonize their activities. 

Meanwhile, the on-again, off-again conflict between the United States and Iran since February has caused European petrol and diesel prices to surge. The fuel spikes have improved the attractiveness to European drivers of ditching fossil fuels and switching to a battery-powered vehicle less exposed to crude oil price swings.

Many Chinese EV manufacturers were quick to respond to an increase in Western European demand for their products this year, incentivized by a severe price war in their domestic market. Chinese manufacturers have exported over 120 EV designs to Europe this year compared to around 100 EV designs from European car companies. Chinese firms like BYD, Chery, SAIC, and Xpeng are expanding their Europe footprints despite tariffs and factors like the EU’s proposed Industrial Accelerator Act (IAA). This would introduce “Made in Europe” requirements in areas like public procurement. The IAA is one of several actual or proposed EU instruments China complains are aimed against its exporters to act as non-tariff trade barriers.

The EU is becoming more protectionist in part because it fears the long-term danger of over-reliance upon Chinese exports, including clean technology products: weaponized dependencies, cybersecurity risks, and espionage threats to the bloc. Some think tanks have even claimed China’s clean technology itself presents a national security threat for Europe. 

The United States will likely encourage European countries to take a wary view of Chinese smart and clean technology exports as more Chinese manufacturers try to expand their footprint there. U.S. lawmakers are already leading the way with the Connected Vehicle Security Act. This would ban imports of China-linked smart vehicles, including EVs, and components by 2030. The legislation would also block Chinese smart cars’ entry into the U.S. from Canada or Mexico. There is a low-probability, but high-impact scenario, that the EU could mimic this approach in areas like EVs.

While not engaged in a trade war with Beijing yet, Europe’s opposition to China’s current industrial development strategy is growing, as is its fear of becoming even more dependent upon Chinese technology and supply chains. China has used its dominance of critical mineral supply chains to severely constrain Japan’s access to these goods. It could use similar restrictions in the future to threaten Western defense supply chains. 

Beijing has increasingly used its economic and political leverage to demand concessions from foreign governments on matters like Taiwan, Tibet, or its maritime boundary disputes in the South China Sea. European governments increasingly fear similar Chinese actions against them in future diplomatic disputes. 

Already, European car manufacturers’ operations were disrupted last year when China restricted automotive chip supplies to Europe after the Dutch government tried to take over Nexperia. This global semiconductor company is a subsidiary of Chinese technology firm Wingtech, and Beijing reacted sharply to this perceived Dutch infringement on a Chinese asset. This confirmed Europe’s fear about its exposure to Chinese trade and technology pressures. 

Security concerns are intertwined with Europe’s frustration with its growing trade deficit with China. This reached a record 359.9 billion euros in 2025, with the EU arguing that the significant asymmetry in market openings between itself and China is at least partially to blame for this gap. Signs of continued Chinese penetration of European markets, such as higher EV sales, will likely mean another worsening of the bloc’s trade deficit with China in 2026.

In June, the EU set a three-month deadline to achieve “tangible” results from China regarding issues like the trade deficit or Chinese non-tariff trade barriers reducing EU firms’ market access there. EU Trade Commissioner Maroc Sefcovic will travel to Beijing in October to assess the progress the two sides have made. 

The EU is also considering fresh measures like tariffs on Chinese plug-in hybrid EVs, independent of the October trade talks. Meanwhile, China has signaled it intends to retaliate against any future EU trade restrictions, rather than make concessions. The conditions for a China-EU trade war are accumulating, even if one has not yet begun in 2026.

However, regardless of the destabilizing direction of relations on trade and other issues, the EU faces counterbalancing pressures to continue imports of Chinese clean technology products like EVs, solar panels, and wind turbines. EU policymakers will likely require access to China’s advanced EV and battery technologies to meet targets like achieving a 100 percent reduction in new vehicles’ emissions from 2035.

EU attempts to reindustrialize and shift to a green economy by 2050 will likewise likely require buy-in from Chinese manufacturers for Europe-based facilities, and injections of Chinese capital to help modernize the continent’s preexisting power and transport infrastructure. EU fears about China’s economic and geopolitical threats will need to be reconciled with its ambitions for domestic economic and technological transformation.

Ultimately, the EU seeks a sustainable accommodation with China rather than a conflict for supremacy, like the one that is increasingly shaping the China-U.S. relationship. China’s decision to put clean technologies and other so-called “new quality productive forces” at the heart of its quest for renewed economic growth means aggressive EU barriers to Chinese exports of these products would trigger a major confrontation that Beijing is probably better placed to weather. 

Equally, however, opinion in the EU and non-EU European states like the U.K. is a lot more skeptical of China today. There is increasing agreement among European governments – including long-time holdouts like Germany – about the need to toughen policy toward Beijing. The German government has examined ways to damage China economically in the event of a trade war, a major policy shift.

Chinese exporters are therefore likely to complain significantly of worsening treatment by European – and especially EU – governments, even as China continues to sell large amounts of EVs and other goods to European customers. The EU is expected to increase the number of investigations into Chinese green manufacturers for breaching fair trade rules on issues like state subsidies, which will anger Beijing. 

There is a strong chance that the two sides will engage in several bouts of trade warfare after October and moving into next year. Nevertheless, Chinese clean technology exports to Europe will likely remain a bright spot for bilateral trade, as external factors like climate change, price wars, or conflict incentivize both European consumers and Chinese exporters to continue the trade that is driving Europe’s switch from fossil fuel economies to the one envisaged in its European Green Deal.