The European Union on Wednesday unveiled additional tariffs of up to 38.1 percent on electric vehicles (EVs) imported from China starting next month, in response to what the bloc called unfair subsidies by the communist regime.
The new duties vary from brand. Brussels will impose 17.4 percent on automaker BYD, 20 percent on Geely, and 38.1 percent on SAIC, a state-owned carmaker, the bloc said in a press release.
The measures will also affect Western companies that manufacture EVs in China, such as Tesla, which has a giga-factory in Shanghai. The bloc said the U.S. giant carmaker “may receive an individually calculated duty rate at the definitive stage.”
The European Commission, the EU’s executive branch, officially initiated the anti-subsidies probe in EVs shipped from China in October 2023.
After eight months of investigation, the bloc has provisionally concluded that Chinese EVs benefit from “unfair subsidization,” which is causing “a threat of economic injury to EU battery electric vehicles producers,” European Commission’s Vice President, Margaritis Schinas, told reporters at Wednesday’s briefing.
Brussels will hand its preliminary plan to Chinese authorities and all related parties. If discussions with Beijing do not result in an effective solution, the provisional duties will be introduced by July 4, according to the statement.
The Chinese Communist Party identified electric cars as one of its priority industries a decade ago. During high-level meetings in March, the regime’s top leaders emphasized its continued focus on EVs, categorizing them as a key component of the “new productive forces.” With its economy faltering and domestic demand declining, the increased state backing for the green energy sector—such as electric vehicles, batteries, and solar panels—has escalated tensions with its trading partners.
Response
The Chinese regime said it was “deeply concerned” and “strongly unsatisfied” with the EU’s tariff hikes.In an online statement on its website, Beijing’s commerce department accused the EU’s ruling of lacking “factual and legal basis.” China will closely monitor the development and “take all necessary measures” to “firmly” defend its rights and interests, the ministry’s spokesperson said.
Reactions to the tariffs are mixed among EU member states.
Spain Energy Minister Teresa Ribera appeared to be more cautious, saying that they must support the Commission’s proposal if any breach of international trade rules occurs.
However, industry groups voiced objections to the new measures.
“As an exporting nation, what we do not need are increasing barriers to trade,” Sten Ola Kallenius, CEO of Mercedes-Benz, said in a statement. “We should work on dismantling trade barriers in the spirit of the World Trade Organisation.”
EU–China Trade War?
Nearly one in five electric cars sold in Europe were made in China in 2023, reported clean energy advocacy group Transport & Environment (T&E) in an analysis released in May. Over half were EVs manufactured in China by Western companies such as Tesla and BMW. Nonetheless, it showcases the remarkable growth of Chinese homegrown brands, which accounted for 7.9 percent of European sales in 2023, up from 0.4 percent in 2019.European car makers could lose 7 billion euros ($7.51 billion) in net profit annually by 2030 if their Chinese competitors continue to increase their market shares in Europe, economic advisers at Germna’s Allianz said in a 2023 report.
Researchers from the Rhodium Group have warned in an April report that even with a 15 to 30 percent tariff hike, Chinese automakers could still be able to maintain “comfortable profit margins” when exporting their vehicles to the European market, thanks to the “substantial cost advantages they enjoy.” To counteract this, Rhodium, a New York-based research firm, said that imposing duties of 40 to 50 percent would be necessary.
Yet any EU duty increase, regardless of the size, will “unavoidably exacerbate the challenges confronting China’s struggling economy,” Sun Kuo-hsiang, an expert on international political economy at Taiwan’s Nanhua University, told The Epoch Times on Tuesday.
That’s because the world’s second-largest economy, particularly the export sector, depends on electric vehicles, photovoltaic panels, and other green technologies to drive its growth, Mr. Sun said.
The only hope for Chinese automakers amid intense competition at home is to increase their share of the overseas EV market, and an increase in EU tariffs could drive some of them to bankruptcy, according to Wang Shiow-wen, a researcher on the U.S.–China trade war and supply chain security at Institute for National Defense and Security Research in Taipei.
“Beijing won’t sit and watch. It’s very likely for Beijing to adopt severe retaliatory measures,” Ms. Wang told The Epoch Times on Tuesday, warning it could spark a full-blown trade war between the EU and China. The Chinese regime has already announced its own anti-dumping probes of brandy imported from the EU, in an apparent response to Brussels’s scrutiny of EVs made in China.
Beijing’s economic retaliation is likely to be “short-lived,” Ms. Wang said, adding that the regime’s need for access to European technologies, among others, will drive it to resume imports from Europe and repair bilateral ties.
“However, the EU will continue to push its ‘de-risking’ strategy. This is an issue related to economic security.”
In addition to electric cars, Brussels has initiated multiple investigations into products imported from China in recent months, covering a diverse range of goods such as biodiesel, medical devices, and solar panel makers.
