China is investigating whether to raise tariffs on European large-engine vehicles and will start collecting levies on brandy, escalating a trade spat after the European Union decided to impose tariffs on Chinese electric vehicles.

Tariffs imposed on Chinese car makers selling electric cars in Europe threaten to create a “lose-lose” trade war, Mercedes-Benz CEO Ola Källenius has told Autocar. China has now confirmed it is investigating raising tariffs on large-capacity combustion cars imported from the EU in response – something that would directly harm Mercedes.

By Nick Carey PARIS (Reuters) - Chinese and European automakers went head-to-head at the Paris car show on Monday, with tensions running high as the EU gears up to impose hefty import tariffs on Chinese-made electric vehicles and the industry struggles with weak demand.