EU preparing to slap Chinese EVs with a 38% tax tariff from July

The European Union has threatened to hit Chinese electric car imports with additional tariffs of up to 38% from next month following an anti-subsidy probe, a move that risks triggering a trade war.

Brussels provoked China’s ire by launching the probe last year in a bid to defend European manufacturers. Hours before the announcement, Beijing warned that such a move would “harm Europe’s own interests”.

In detail

There is also dissent within the EU, with Germany, a major trade partner to China, saying the tariffs would harm German companies.

The European Commission has now ordered a provisional hike of tariffs on Chinese manufacturers: 17.4% for market major BYD, 20% for Geely and 38.1% for SAIC.

The commission said the amount depended on the level of state subsidies received by the companies.

All other electric car producers in China which had cooperated with the commission’s probe but were not sampled would face an average duty of 21%, it added.

The remaining EV producers which did not cooperate with the investigation would be subject to a 38.1% duty. This would be on top of the current rate of 10% on all electric cars produced in China.

To halt the extra tariffs being levied, Beijing and Brussels must resolve the subsidies issue.

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“The Commission has provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” it said in a statement.

“Should discussions with Chinese authorities not lead to an effective solution, these provisional countervailing duties would be introduced,” it added.

The tariffs will apply provisionally from July 4 and then definitively from November unless there is a qualified majority of EU states – 15 countries representing at least 65% of the bloc’s population – voting against the move.

China warned prior to the announcement that the tariffs would amount to “protectionism”.

“It goes against the principles of market economy and international trade rules, undermines China-EU economic and trade cooperation as well as the stability of the global automobile production and supply chain,” foreign ministry spokesman Lin Jian said.

“China will take all necessary measures to firmly safeguard its legitimate rights and interests,” he said.

China warning

Brussels launched the probe last year, with officials saying they wanted to put the brakes on what they claimed were unfair practices undercutting Europe’s car manufacturers.

The EU’s tariffs, while high, are lower than the United States’ 100% rate imposed from last month on Chinese electric cars. Not all 27 EU member states welcome the commission’s move.

Germany, Hungary and Sweden already expressed reservations about the investigation and the push to slap higher duties.

“The European Commission’s punitive tariffs hit German companies and their top products,” German transport minister Volker Wissing wrote on X.

“Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation,” Wissing said.

China is an important market for German car makers, while Hungary, which a month ago hosted a visit by Chinese President Xi Jinping, is clearing land for a BYD factory to be built next year.

The Chinese Chamber of Commerce to the EU (CCCEU) warned the rates announced “will pose a serious market barrier” and slammed the “politically motivated and protectionism driven” investigation.

The CCCEU said the probe lacked “substantive and substantiated complaints from its domestic industry” since it was launched by the commission without a complaint from manufacturers.

Retaliation

Chinese media ramped up threats that Beijing could target EU exports, including pork and dairy products, in the weeks running before the commission’s decision.

China is an important country for EU’s agriculture sector and any move by Beijing could deliver acute pain to European exports.

The Asian country is the third destination for the EU’s agri-food exports after Britain and the United States. China is the world’s biggest car exporter and Europe is a critical market for it.

EU imports of EVs from China mushroomed from around 57 000 in 2020 to around 437 000 in 2023, the US-based Peterson Institute for International Economics said.

Ahead of the EU’s move, Germany’s Kiel Institute for the World Economy said in a report that a 20% tariff would mean 125 000 fewer Chinese electric cars to the EU, worth almost $4-billion.

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