Europe and China have reached a deal to stop a potential trade war. For months, there has been tension over the number of Chinese hybrid cars being sold in Europe. Hybrid cars use both gas and electricity to run.

Europe was worried that these Chinese cars were becoming too popular too quickly. This was hurting European car companies. In response, Europe planned to put strict limits or extra taxes on these imports.

Now, both sides have agreed to a compromise. China has agreed to place limits on how many hybrid cars it sends to Europe. In exchange, Europe will hold off on major new trade restrictions that could have caused a lot of damage to the relationship between the two.

This deal is a big deal for the car market. It is already having an impact. Following the news of the deal, the price of lithium—which is a key metal used to make batteries for these cars—dropped by 10%.

Experts say this was a smart move for everyone involved. It allows Europe to protect its own car makers, while China keeps access to the European market without starting a full-blown fight.

For now, the two sides are choosing to talk rather than fight, keeping the door open for more business in the future.

Source: South China Morning Post