On Thursday, China’s commerce ministry warned that an investigation by the European Commission, into Chinese electric vehicles which are believed to have benefitted from state subsidies, will have a “negative” effect on economic and trade ties between the EU and China.

Launched on Wednesday, the investigation will examine if the EU needs to impose punitive tariffs to protect EU manufacturers from a “flood” of cheaper Chinese EV imports, according to European Commission President Ursula von der Leyen.

In a statement, the commerce ministry said, “China believes the investigative measures proposed by the European Union are in reality to protect its own industry in the name of ‘fair competition’.”

The statement went on to say, “It is a naked protectionist act that will seriously disrupt and distort the global automotive industry and supply chain, including the EU, and will have a negative impact on China-EU economic and trade relations.”

The investigation, which was begun by the European Commission, and was not due to any industry complaint, will further exacerbate a tense relationship with China which has been strained in part by trade and investment imbalances.

According to Chinese customs data, China’s exports to the EU increased 8.6% to $562 billion in 2022. However imports from the EU fell 7.9% to $285 billion off weaker Chinese demand, which sharply increased the EU’s trade deficit with Beijing for the second year.