The European Union’s decision to impose tariffs on Chinese electric vehicles has moved the focus to how and when Beijing will retaliate for the escalation in its biggest trade dispute with the bloc in years.

Despite opposition from Germany, the European Union will start imposing tariffs as high as 45 percent on Chinese-made electric vehicles. Elon Musk’s marque takes the smallest hit.

Brian Gu, Xpeng’s co-president, argued Wednesday that fierce local competition, not state support, explains China’s EV success.

A mild rally in the shares of automakers after the European Union voted to impose tariffs on electric vehicles from China does little to alleviate a bleak year for the sector’s investors.

EV tariffs won’t tackle China’s growing clout in hybrid vehicles and critical batteries, or stop trade tensions spreading to other theatres.

If EU tariffs are approved, Xpeng will be slapped with an additional 21.3% surtax. The brand also sees the US as an important market but can’t launch locally, at least not yet. Xpeng is open to contract manufacturing in Europe.

The European Union unleashed one of its most powerful economic tools on China, imposing tariffs on electric vehicles in a move that increases the risk of retaliatory measures and backfiring on domestic consumers and companies.

Options include contract manufacturing, tapping existing factories or a new assembly plant, top company official says.