The European Commission’s anti-subsidy probe into electric vehicle (EV) imports from China prompted a retaliation from the Chinese government.

The Chinese government launched a trade probe into luxury liquor producers from Europe. Fortune states that Beijing’s probe targets liquor producers directly competing with China’s most valuable state-owned company. Through the investigation, President Xi Jinping aims to examine price dumping among EU brandy vendors selling in China.

The Chinese government’s EU liquor probe starts several months after Brussels started investigating cheap EV imports from China, including BYD. In September 2023, the annual IAA Mobility Show revealed the growing presence of Chinese EV manufacturers in Europe, shocking legacy automakers from the region. The volume of Chinese EVs at the event caught the eye of the European Commission.

By October 2023, the President of the European Commission, Ursula von Der Leye, announced the start of the probe into EV imports from China to the EU. She highlighted that Europe’s EV market was flooded with cheap electric vehicles whose prices were “kept artificially low” by “huge state subsidies.”

“The probe comes after a surge in EU imports of electric vehicles (EVs) from China, outstripping other Chinese export markets. It may result in the Commission levying countervailing tariffs on EU imports of BEVs from China to offset state subsidies if substantiated and to level the playing field,” noted the European Commission.

Prices have become a critical factor in the success or failure of an electric vehicle in the growing market. China has had a distinct advantage when it comes to prices. China’s top new energy vehicle manufacturers beat Tesla in the fourth quarter in terms of volume, partly due to the low prices of its EVs and the range of its electric vehicle lineup.