FX.co ★ China-EU tensions risk escalating into trade war

China and the European Union appear to be on the verge of a trade war. Politico analysts are concerned about a potential trade conflict following the EU's decision to raise tariffs on imported Chinese electric vehicles.

"The European Commission shocked China on Wednesday by imposing duties of up to 38.1 percent on electric vehicle imports from July 4 — a level that was much higher than expected — potentially triggering a trade war at a time of great political uncertainty in Europe," Politico reported.

In response, Chinese authorities launched an investigation into European liquor producers. Beijing also threatened to impose restrictions on European farmers and aircraft manufacturers.

Earlier, it was reported that the new EU tariffs on Chinese EVs would likely cost China nearly $4 billion. In retaliation, Beijing promised to unleash tariffs of up to 25% on imported cars with large engines, potentially targeting major companies such as Mercedes-Benz Group and BMW.