China announced Monday that it has reached an agreement with the European Union concerning exports of Chinese-made electric vehicles to the bloc, marking a potential turning point in trade tensions over the fast-growing EV market.

Beijing’s Commerce Ministry said the EU will introduce guidelines establishing minimum pricing for Chinese auto exporters. While the ministry did not confirm whether the deal includes lifting tariffs of up to 35.3% imposed by the EU in 2024, it said the agreement supports “the healthy development of China–EU economic and trade relations” and helps protect the rules-based international trading system.

European and American automakers have raised alarms over the rapid overseas expansion of Chinese EV manufacturers. The EU introduced tariffs last year after an investigation concluded that Chinese producers benefited from unfair state subsidies, allowing them to sell vehicles in Europe at significantly lower prices. The United States went further, imposing a 100% tariff on Chinese-made electric vehicles in 2024.

Imports of battery-powered cars into Europe surged from $1.6 billion in 2020 to $11.5 billion in 2023. Much of that volume came from Western automakers such as Tesla and BMW, which manufacture EVs in China for export.

EU officials have warned that Chinese domestic EV brands are positioned to rapidly gain market share by undercutting European competitors, aided by extensive government support. That assistance includes state-backed loans, discounted land for factories, tax incentives, government fleet purchase mandates, and subsidized raw materials and components.

While U.S. tariffs have effectively shut Chinese EVs out of the American market, Europe remains more exposed. At the same time, the EU faces pressure to secure affordable electric vehicles to meet its target of cutting greenhouse gas emissions by 55% by 2030.