The European Union (EU) has decided to impose tariffs from 17.4% to 38.1% on EVs imported from China from July 4, a month after the U.S. announced plans to quadruple the duties on Chinese EVs to 100%. The EU has alleged that the possible government assistance to Chinese automobile makers and exporters, according to the World Trade Organization (WTO) countervailing treaty, would unfairly afford Chinese automakers and exporters an advantage, causing severe harm to the EU’s auto industry. But the imposition of additional tariffs will also hit European car manufacturers such as Volkswagen and BMW as more than 50% of the EVs China exports to the EU are actually produced by Western auto firms. For example, one of the best-selling and most affordable EVs in the European market is made by Renault’s joint venture company in China and sold in Europe under its marque Dacia. Cars from SAIC will face a 38.1% duty after the European Commission (EC) said it did not participate in the investigation. For BYD, the duty is 17.4% and for Geely it is 20%. Both firms were seen to be more compliant with the EU probe. The proposed tariffs come on top of the current 10% import duty on Chinese EVs. U.S. company Tesla has already applied for a lower duty, claiming it has received less in subsidies than the firms probed. That will be the subject of a new inquiry by the Commission, with Tesla required to pay the full duty in the interim. Turkey has also decided to impose an additional 40% tariff on vehicles imported from China.
Meanwhile, China has launched an anti-dumping investigation on the imports of EU pork and pig products, although it says this is not in retaliation for the EU's tariffs on Evs, but at the request of Chinese industry bodies.
The China Chamber of Commerce to the EU (CCCEU) pointed out that China’s exports of EVs to the EU accounted for only about 5% of its total production in 2023 and notably, these exports are primarily European and U.S. branded EVs. The United States EV maker Tesla accounted for 28% of all Chinese-made EVs imported by Europe, while French carmaker Renault’s Dacia Spring added an additional 20%, according to a study in late March by European think tank Transport and Environment.
The provisional targets will be imposed on July 4 and could become permanent in November, following public consultation and if both parties do not come to an agreement. EU member states with large automotive sectors are ready to fight the Commission over the imposition of permanent duties in November. Germany – home to Volkswagen, BMW, Mercedes-Benz and other famous brands, many of which have gone public with their opposition – is expected to lead the backlash, and has already lobbied intensely against the duties. Sweden, home to Geely-owned Volvo and Polestar, is another opponent.
China's Ministry of Commerce (MOFCOM) noted that the EU is “destroying fair competition” in the name of “safeguarding fair competition,” which is the biggest unfairness of all. China's Foreign Ministry Spokesperson Lin Jian warned that the EU's anti-subsidy investigation violates the principles of the market economy and international trade rules, and will harm the EU's interests. The China Association of Automobile Manufacturers (CAAM) said that the EC's decision is totally unacceptable, urging the bloc to avoid harming and distorting the global automotive industry chain.
BMW CEO Oliver Zipse said the EU action could hinder the development of European automotive companies and ultimately harm Europe’s own interests. The protectionist measure could trigger a cycle of retaliation, leading to a breakdown in cooperative trade relations, he said. “The decision for additional import duties is the wrong way,” Zipse added, as the EU is harming European companies and interests. “Protectionism risks starting a spiral: tariffs lead to new tariffs, to isolation rather than cooperation,” he added. “We should recall how Europe has guaranteed economic prosperity over the past decades, not by closing markets but by opening them,” Ola Kaellenius, Mercedes-Benz CEO, said.
"The negative effects of this decision outweigh any potential benefits for the European and especially the German automotive industry," Volkswagen said in a statement. Stellantis, which was formed from the merger in 2021 of the Italian-American conglomerate Fiat Chrysler Automobiles and the French PSA Group, said it believes in free and fair competition in a worldwide trade environment and does not support measures that contribute to global fragmentation. The German Association of the Automotive Industry spoke against the EU’s move. Spokesperson Simon Schuetz said that the German automobile industry is not in favor of the tariffs because they do not believe tariffs are a good measure to resolve this conflict. The European Automobile Manufacturers’ Association (ACEA) said: “Free and fair trade is essential in creating a globally competitive European automotive industry, while healthy competition drives innovation and choice for consumers.”
Several Chinese government departments and organizations voiced strong opposition to the European Commission (EC)'s decision and vowed all necessary countermeasures, urging the EU to immediately correct its wrongdoings. Observers said the move is purely political, helping neither EU consumers nor EU auto industries, and they added that China will take resolute measures to safeguard its lawful interests. China rejects the accusation that it unfairly subsidizes its EV industry.
According to the WTO’s anti-dumping and countervailing rules, subsidies that constitute an apparent violation of WTO rules should contain two elements: one, subsidies should directly pertain to exports; and two, they should be received directly during the manufacturing stage. But neither element is apparent in this case. First, there is no specific evidence of the Chinese government giving exports-specific subsidies to Chinese EV makers. Logically speaking, one would expect Chinese-made EVs sold in the EU to be less expensive than the ones sold at home if such exports-specific subsidies were indeed given to the EV makers. In reality, however, the exact opposite is true. Second, the so-called government subsidies to EV makers are mostly incentives provided by local governments to consumers – something that the EU also does – R&D to institutions specializing in basic research, product development firms and manufacturing plants. Such subsidies fall in the gray area under the WTO’s countervailing rules, and are usually litigated through the WTO’s dispute settlement mechanism. Even if such types of government aid were given to Chinese EV makers, the value apportioned to each EV exported to Europe would be so small that a comparable tariff would not be more than a few euros per EV.
“Prices of European EVs are as much as twice those of Chinese EVs. The new tariffs will not have much influence on the popularity of Chinese EVs in the EU market. The tariffs will help Chinese EV producers upgrade and eliminate outdated ones and will have little impact on big players like BYD,” said Yao Yang, Director of the China Center for Economic Research at Peking University. "The swift and loud opposition from EU industries and member countries is a reminder that the EC's politically charged probe could not even garner the support of those it claimed to protect," Cui Hongjian, Professor at the Academy of Regional and Global Governance of the Beijing Foreign Studies University, told the Global Times.
The China Daily writes that the European Union’s decision to slap higher tariffs on imported Chinese electric vehicles will not only deal a short-term blow to Sino-European trade but also disrupt global industrial and supply chains. “While the action may appear to ‘protect’ the local automotive industry in the short term, it will severely impact the long-term healthy development of the EU’s auto industry and potentially damage the overseas business environment for EU companies,” the National Development and Reform Commission (NDRC) said. “Shortsighted trade protectionism is not the solution, and the EU should carefully reconsider and promptly correct this misguided approach,” the NDRC added.
Meanwhile, China has pledged to take all necessary actions to safeguard the legitimate rights and interests of Chinese companies, according to the NDRC. The Ministry of Commerce (MOFCOM) said that it reserves the right to raise the EU’s “illegal and protectionist” tariffs on Chinese EVs at the World Trade Organization (WTO) and the NDRC is contemplating imposing import duties on imported cars with engines larger than 2.5 liters, which would have a major impact on car imports from the EU. According to the China Passenger Car Association (CPCA), the EU exports a total of USD18 billion worth of cars with large-displacement engines to China each year, which is higher than the value of EVs China exported to the EU in 2023. If China raises temporary tariffs, EU brands like BMW and Mercedes-Benz will bear the brunt. China might also launch an anti-dumping probe into certain EU dairy products and impose import tariffs on European brandy, which would mainly target French cognac.
China’s first ranking Vice Premier Ding Xuexiang is visiting the European Union this week to “deepen” the “green partnership” amid the growing threat of a trade war. Ding, a member of the Politburo Standing Committee who ranks No 6 in the Communist Party’s hierarchy, is visiting Brussels and Luxembourg on a five-day visit which started on June 17. “China stands ready to work with the EU to broaden the areas of cooperation and explore new collaboration models. We hope to deepen and solidify our green partnership and make green the most distinctive color of China-EU cooperation,” Chinese Foreign Ministry’s Spokesman Lin Jian said, adding that “China and the EU share extensive common interests and a broad space for cooperation in green development and have maintained good dialogue and cooperation.”
China is the world’s largest automotive and EV market, with electric car sales accounting for 60% of the global total. Last September, UBS predicted Chinese-made cars, benefiting from a faster pace of electrification, would control a third of the global market by 2030, up from 17% in 2022.
This overview is based on reports by the Global Times, China Daily and South China Morning Post.
