The European Commission, which oversees the bloc's trade policy, announced last month that it planned to levy five-year import duties of up to 36 percent on electric vehicles imported from China.
The following day, Beijing said it would launch a probe into EU subsidies of some dairy products exported to China.
"I have to be blunt and frank with you that we need to reconsider all of us, not only member states but also the Commission, our position towards this," Sanchez told journalists after being asked about the tariffs at a news conference near Shanghai.
"As I said before, we don't need another war, in this case a trade war," he added.
"I think that we need to build bridges between the European Union and China and from Spain.
"What we'll do is to be constructive, and to try to find a solution, a compromise between China and the European Commission."
Sanchez's visit has seen him meet top officials including President Xi Jinping and call for "dialogue and cooperation" with the world's second largest economy.
The trip comes against the backdrop of mounting trade tensions between the European Union and China, primarily over Beijing's subsidies for its electric vehicles sector.
In June, China launched an anti-dumping investigation into pork imports from the bloc in response to an application submitted by a local trade grouping on behalf of domestic producers.
The Iberian nation is the European Union's largest exporter of pork products to China, selling more than 560,000 tonnes last year totalling 1.2 billion euros ($1.3 billion), according to industry body Interporc.
- 'Fair trade' -
On Monday, Sanchez called for Madrid and Beijing to defend what he called a "fair trade order".
"We must work together to resolve differences through negotiation, in a spirit of dialogue and collaboration, and within multilateral frameworks," he wrote on social media after meeting Xi.
China and the European Union have butted heads in recent years on a range of issues relating to trade, technology and national security.
Brussels has launched a raft of probes targeting Chinese subsidies for solar panels, wind turbines and trains.
But it faces a delicate balancing act as it tries to defend Europe's crucial auto industry and pivot towards green growth while also averting a showdown with Beijing.
On Wednesday, the president of an EU business lobby in Beijing said overcapacity of Chinese electric vehicles was among the top concerns facing European firms in the country.
The risks of doing business in China are "mounting and the rewards (are) seemingly decreasing", the EU Chamber of Commerce said in a position paper Wednesday.
"Many investors are now confronted with the reality that the problems they are facing in the China market may be permanent features," said the Chamber, which drew on the views of the more than 1,700 EU firms operating in the country.
"A substantial strategic rethink" may now be required, it warned.
A European Commission official has said the EU executive remained "open" to resolving the trade dispute without resorting to tariffs -- but that "it's very much up to China to come up with alternatives".
Beijing has so far filed an appeal against the measures with the World Trade Organization -- which Brussels has acknowledged while voicing confidence the tariffs are WTO-compatible.
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