New Delhi

China and the European Union are locked in a trade battle over China's EV overcapacity. The European Commission plans to impose import duties on Chinese EVs, ranging from 17 per cent to 38 per cent, on top of its standard 10 per cent tariff for car imports.

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As both countries agree on trade talks, let's see the possible outcomes in-store and the potential global implications.

What are provision measures?

Provisional duties can be imposed within nine months of starting the investigation. Definite duties, the deadline for which is November 3, is the time by which the EU has to conclude if the influx of Chinese EVs is hurting the EU's domestic industry.

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Many European countries are reliant on China for EV imports. Germany's economy minister, Robert Habeck, has been vocal about conducting concrete negotiations with China. 'What I suggested to my Chinese partners today is that the doors are open for discussions & I hope that this message was heard.' He said in Shanghai after meeting Chinese officials in Beijing.

The EU Commission is set to deliver its final verdict on July 4. China and EV producers have until July 18 to comment on the findings. The commission has reportedly visited more than 100 sites of EV automakers, both in China and Europe.

Definitive duties are expected to be lower than provisional rates. This is possible as some of the arguments are expected to hold ground. The commission must also consider Tesla's request for a separate duty rate.

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EV prices are also expecting a jolt from this outcome. Due to China's competitive pricing, the discounted prices are expected to surge as exporters eye a minimum price to counter export curbs.

Who decides?

The European Commission has full powers to impose duties at the provisional stage, although it does consult EU members. This could potentially help China's cause since major EU members are against tariffs on China.

In case of definite duties, it can be blocked if a qualified EU majority, or 15 EU members, oppose the measures. This means the EU must address domestic industry concerns and keep them in sync with their plans. China is the world's largest car market, and many fear potential losses if tariffs are imposed. Many are concerned about China's retaliation. The pork industry is already reeling from the proposed tariffs on EU pork imports.

Concerned companies can challenge the decision at the European Court of Justice. China can also take the European Union to the World Trade Organisation. Either way, it will be a long process, and a compromised outcome is likely to happen.