The European Union announced on Wednesday that it would impose higher tariffs on Chinese electric vehicle (EV) imports, accusing them of benefiting “heavily from unfair subsidies” and posing a “threat of economic injury” to European EV producers.
This decision follows an EU Commission probe that began in October, which found the battery electric vehicle (BEV) value chain in China to be unfairly subsidized.
On a preliminary basis, the EU Commission concluded that it is in the EU’s interest to impose “provisional countervailing duties” on BEV imports from China. These duties, which are set to take effect from July 4 if talks with Chinese authorities do not reach a resolution, aim to counteract the effects of the subsidies. Definitive measures are expected to be implemented within four months of the provisional duties.
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“The influx of subsidized Chinese imports at artificially low prices therefore presents a threat of clearly foreseeable and imminent injury to EU industry,” the Commission noted.
China has reacted strongly to the EU’s decision. A spokesperson for China’s Ministry of Commerce described the decision as lacking factual and legal basis, branding it a “protectionist act.” The ministry stated that China’s competitive advantage in the EV sector stems from open competition and adherence to World Trade Organization (WTO) rules.
“This is a naked protectionist act, creating and escalating trade frictions, and destroying fair competition in the name of maintaining fair competition,” the spokesperson said. “This move by the EU not only damages the legitimate rights and interests of China’s electric vehicle industry, but will also disrupt and distort the global automotive industry chain supply chain, including the EU.”
Tariff Breakdown
The new tariffs are significant:
- 38.1% tariff on BEV producers who did not cooperate with the EU investigation.
- 21% duty on carmakers who complied but were not sampled.
Leading Chinese BEV producer BYD faces a 17.4% tariff, while Geely is subject to a 20% duty. Autos firm SAIC has been hit with the 38.1% tariff. The investigation and tariff impositions continue, with the possibility of individually calculated duty rates for other manufacturers, such as Tesla, which has a giga factory in Shanghai.
Industry Reactions
Nio, a prominent Chinese EV manufacturer, voiced strong opposition to the tariffs, pledging continued commitment to the EV market despite the challenges.
“We strongly oppose the use of increased tariffs as a strategy to obstruct the normal global trade of electric vehicles. This approach hinders rather than promotes global environmental protection, emission reduction, and sustainable development,” Nio stated.
Global Implications
The EU’s decision comes after extensive debates among member states. France has been a strong advocate for higher duties to protect European industries from what it views as unfair Chinese practices. In contrast, Germany has cautioned against potential trade wars, highlighting risks for European carmakers if China retaliates.
Trade tensions between the EU and China have escalated in recent months, particularly over the EV market. The EU’s investigation into Chinese subsidies and accusations of market dumping have intensified these frictions. The EU maintains that such practices threaten its EV industry and could crowd out local carmakers.
The United States has aligned closely with the EU on this issue, raising tariffs on various products, including EVs imported from China. U.S. duties on imported EVs are set to quadruple from 25% to 100% this year, further complicating Chinese EV makers’ efforts to penetrate the North American market.
For Chinese EV makers, these increased tariffs present a significant hurdle in their efforts to expand beyond their domestic market. The EU and U.S. are two of the largest markets for electric vehicles, and the imposition of high tariffs in both regions severely restricts access.
Economists and industry experts have weighed in on the implications of these tariffs, noting that the EU’s move is a strong statement against unfair trade practices but risks escalating trade tensions that could have broader economic repercussions. They also emphasize the need for European carmakers to innovate and compete on a level playing field, arguing that the focus should also be on enhancing competitiveness through sustainable practices and technological advancements.
China’s EV market has grown rapidly, with companies like BYD competing against global giants like Tesla for market share. Chinese EV manufacturers have also been expanding into Western markets, presenting themselves as more affordable alternatives to regional carmakers.
However, the new tariffs could significantly impact their competitiveness in both the European and North American markets.