The European Union threatened on Wednesday to hit Chinese electric car imports with additional tariffs of up to 38% from next month following an anti-subsidy investigation, a move that risks sparking a trade war.
Brussels drew China’s ire by launching the investigation last year in a bid to defend European manufacturers.
Hours before the announcement, Beijing warned that such a move would “damage Europe’s own interests”.
There is also disagreement within the EU, with Germany, a major trading partner of China, saying the tariffs will hurt German companies.
The European Commission has now ordered a temporary increase in tariffs on Chinese manufacturers: 17.4 percent for market giant BYD, 20 percent for Geely and 38.1 percent for SAIC.
The committee said the amount depends on the level of government subsidies the companies receive.
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All other electric car makers in China that had cooperated with the commission’s investigation but were not sampled would face an average tariff of 21 percent, he added.
The remaining BEV producers that did not cooperate with the investigation will be subject to a 38.1% duty.
That would be above the current rate of 10 percent for all electric cars produced in China.
To stop additional tariffs being imposed, Beijing and Brussels must resolve the issue of subsidies.
“The Commission has provisionally concluded that the battery electric vehicle (BEV) value chain in China benefits from unfair subsidies, which pose a risk of economic injury to EU BEV producers,” it said in a statement.
“If discussions with the Chinese authorities do not lead to an effective solution, these temporary countervailing duties will be introduced,” he added.
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The tariffs will take effect temporarily from July 4 and then permanently from November unless a qualified majority of EU states — 15 countries representing at least 65 percent of the bloc’s population — vote against the move.
China warned before 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,” said Foreign Ministry spokesman Lin Jian.
“China will take all necessary measures to vigorously safeguard its legitimate rights and interests,” he said.
Warning for China
Brussels launched the investigation last year, with officials saying they wanted to put the brakes on what they claimed were unfair practices undermining European carmakers.
The EU tariffs, while high, are lower than the 100% rate the United States imposed last month on Chinese electric cars.
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Not all 27 EU member states welcome the Commission’s move.
Germany, Hungary and Sweden have already expressed reservations about the investigation and the push for higher tariffs.
“The European Commission’s punitive tariffs are hurting German companies and their top products,” German Transport Minister Volker Wissing wrote to X.
“Cars must be made cheaper through more competition, open markets and significantly better business conditions in the EU, not through a trade war and market isolation,” Wissing said.
China is an important market for German automakers, 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. Geely owns Volvo, the Swedish carmaker.
The Chinese Chamber of Commerce in the EU (CCCEU) warned that the announced interest rates “will be a serious obstacle to the market” and criticized the investigation as “politically motivated and protectionist”.
The CCCEU said the investigation had no “substantial and substantiated complaints from its domestic industry” as it was initiated by the Commission without complaints from manufacturers.
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Retaliation
Chinese media stepped up threats that Beijing could target EU exports, including pork and dairy products, in the weeks before the Commission’s decision.
China is an important country for the EU’s agricultural sector and any move by Beijing could cause severe pain for European exports.
The EU exported about 1.7 billion euros ($1.8 billion) worth of dairy products last year, up from nearly 2.1 billion euros in 2023.
The Asian country is the third largest destination for EU agri-food exports after Britain and the United States.
China is the world’s largest car exporter and Europe is a critical market for it.
EU electric vehicle imports from China rose from around 57,000 in 2020 to around 437,000 in 2023, according to the US-based Peterson Institute for International Economics.
Before the EU 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 in the EU, worth nearly $4 billion.
Source: AFP