The European Union said on Wednesday it would impose additional tariffs of up to 38 percent on electric vehicles imported from China into the bloc, in what EU leaders called an effort to protect the region’s manufacturers from unfair competition.
The move, a month after President Biden quadrupled US tariffs on Chinese electric vehicles to 100 percent, opens another front in escalating trade tensions with China amid growing fears of a glut of Chinese green technology goods flooding global markets.
The actions of the European Union and the United States also reflect the challenges faced by traditional carmakers in Europe and the United States from newly established Chinese companies with a focus on electric vehicles and much lower cost bases than their rivals in West. .
But unlike American carmakers, some of their European counterparts are deeply involved in the Chinese market, and their cars made there will also be subject to higher tariffs. They have criticized the European Union’s move to raise tariffs by 10 percent, fearing retaliation from China, as well as a price hike across the market and a drop in demand for battery cars.
The increases announced Wednesday, which come on top of the existing 10 percent rates, are preliminary and will take effect July 4. They range from 17.4 percent to 38.1 percent for three of the top Chinese manufacturers, BYD, Geely and SAIC. The charges are calculated based on the level of cooperation with European officials, who have spent the past few months investigating the level of Chinese government support for these companies.
Other automakers that make electric vehicles in China, including European companies with factories or joint ventures there, face a tariff of 21 percent or 38.1 percent, the European Union said. These fees also depend on their cooperation with the investigation.
The European Union defended the move, saying in a statement that an investigation that began on Oct. 4 had found that China’s electric vehicle supply chain “benefits heavily from unfair subsidies in China and that the flow of subsidized Chinese imports is artificially low.” . The prices therefore pose a threat of clearly foreseeable and immediate injury to the EU industry.
China denounced the tariffs as lacking “factual and legal basis” that amounted to “weaponizing economic and trade issues,” said He Yadong, a spokesman for the Ministry of Commerce.
“This is inconsistent with the consensus reached by Chinese and European leaders on strengthening cooperation and will affect the atmosphere of bilateral economic and trade cooperation between China and Europe,” he said.
The European Commission, the executive arm of the European Union, opened the investigation to determine whether the Chinese government was effectively subsidizing its production of electric cars and shipping them to Europe at prices that undercut European competitors.
The automotive sector provides nearly 13 million jobs in the 27-nation bloc, the world’s second-largest market for electric vehicles after China. Electric car imports from China last year reached $11.5 billion, up from $1.6 billion in 2020.
About 37 percent of all electric vehicles imported into Europe come from China, including cars made by Tesla, BMW and Renault-owned Dacia. Chinese brands account for 19 percent of the European EV market. Their numbers have been growing steadily, according to a study by the Rhodium Group.
Europe is open to engaging with Chinese officials to resolve the dispute, said top EU communications officials, who insisted the bloc was not seeking to impose higher tariffs for its own sake but was moving to protect its nations industry.
Tesla, which makes its Model 3 and Model Y in Shanghai for the European market, has asked for tariffs on its cars to be calculated individually, EU officials said. Other companies seeking an individual review have nine months to file their petitions, although none had done so by the time of Wednesday’s announcement.
Ursula von der Leyen, president of the European Commission, said last month that Europe was taking a “tailored approach” to calculating its tariff increase from the existing 10 percent, which would “correspond to the level of damage” of caused. Tariffs for other exporting companies will be based on the weighted average of the tax levied on the three companies that were investigated.
Before the announcement, China had warned it could retaliate by raising tariffs on imported European gas cars, agricultural and aviation goods. China already applies a 15 percent tariff on all electric vehicles imported from Europe.
These include cars made by BMW and Volkswagen, for example, which not only sell in China, but also have large production facilities there.
German carmakers fear the tariffs will raise prices in Europe and trigger retaliation from the Chinese, hurting them in both markets. Germany’s Chancellor Olaf Scholz criticized the tariff hike last week during a visit to a plant in Rüsselsheim, which is owned by Opel of Stellantis.
“Isolation and illegal customs barriers – which ultimately just make everything more expensive and everyone poorer,” said Mr. Scholz. “We don’t close our markets to foreign companies, because we don’t want that for our companies either.”
Economic experts had warned that tariff increases of up to 20 percent could disrupt trade routes. The Kiel Institute for the World Economy calculated that such an increase would prevent $3.8 billion worth of electric vehicles from China from entering Europe.
But other experts point out that Chinese manufacturers’ cost advantage over older European automakers in making components such as electronic modules and battery cells means Europe would need to impose duties of at least 50 percent to be effective. .
Even if European automakers were able to fill the gap, a decline in the number of Chinese models would raise the overall price of electric vehicles, given higher labor and production costs, the institute said.
“It is by no means a foregone conclusion that European carmakers will fill the gap,” said Julian Hinz, a trade researcher at the institute. Another threat to European manufacturers, he said, is the reality that Chinese manufacturers already have plans to expand production in Europe.
BYD, China’s leading carmaker, has set its sights on becoming a leading electric vehicle maker in Europe by 2030. Late last year, it named Hungary as the country where it plans to build its factory first assembly in the European Union. The company said it was considering setting up a second factory elsewhere in Europe.
Chery, another Chinese manufacturer, announced last month that it would open a plant near Barcelona, Spain, as part of a joint venture with Spain’s EV Motors.
Other European countries are also keen for Chinese automakers to move to their home turf, with the idea that they would create jobs and strengthen domestic supply chains.
President Emmanuel Macron of France has made a concerted effort to attract more battery production, including from Chinese companies, to a northern region where factory jobs have been declining. Bruno Le Maire, France’s finance minister, went even further, stating that the Chinese auto industry is “very welcome in France”.
Given the prospect of Chinese firms expanding in their own backyard, many European automakers say they are more concerned about increasing their own competition than tariffs.
Volkswagen, which has several manufacturing and research sites in China, said it was concerned about the tariffs, which the company sees as harmful, especially when demand for electric cars in Europe is falling.
“Increasing EU import tariffs could trigger a fatal dynamic of measures and countermeasures and result in an escalation of trade conflicts,” the company said Wednesday in a statement. “We assume that the negative effects of the decision will outweigh any positive aspects.”
The tariffs are expected to take effect early next month. The affected companies and the Chinese government will then have several days to assess. The commission will then have until November before the final five-year tariffs come into force.