EU Votes to Impose Tariffs on Electric Cars Made in China

Employees work on an electric vehicle production line at the Leapmotor factory in Jinhua, Zhejiang Province, China, on Sept. 18, 2024. Adek Berry/AFP via Getty Images

The European Union has decided to impose hefty customs duties on electric vehicles made in China, in its highest-profile trade measure against the country in more than a decade.

The European Commission said on Oct. 4 that it received the “necessary support” to adopt its tariff proposals. This means it can now proceed with imposing definitive tariffs of up to 36.6 percent—on top of the current 10 percent—on EVs shipped from China.

The vote tally is not publicly available. Under EU rules, the introduction of EV duties requires a qualified majority of 15 EU members, representing 65 percent of the bloc’s population, to support its plan.

The decision brings the commission close to the end of a year-long investigation, which was formally announced by Ursula von der Leyen, head of the European Commission, in her State of the Union address in September 2023. She cautioned that the global market is “flooded with cheaper electric vehicles” and that the prices are kept “artificially low by huge state subsidies.”

“This is distorting our market,” she said at the time. “And as we do not accept this from the inside, we do not accept this from the outside.”

In its preliminary findings released in June, the commission revealed that the Chinese communist regime’s state subsidy network reached almost every part of the EV supply chain, from obtaining raw materials and manufacturing batteries to assembling cars and transporting them to ports.

For automakers, benefits they received in China included securing land usage rights from local authorities at prices below the market value, accessing preferential interest rates on loans from state-owned banks, securing a supply of lithium and batteries from state-backed companies, and benefiting from tax reductions or exemptions as part of state policies.

“The Commission concluded that there is a threat of material injury for the Union industry which is clearly foreseeable and imminent,” the commission stated.

China denied the EU’s accusations, and in a statement issued later on Oct. 4, its Ministry of Commerce said it “firmly opposes” the decision to impose duties on Chinese EVs.

“[Raising tariffs] will only shake and hinder the confidence and determination of Chinese companies in investment and cooperation in Europe,” the ministry said. “China will take all measures to firmly protect the interests of Chinese enterprises.”

China has already taken the EU’s proposed duties to the World Trade Organization (WTO) and opened anti-subsidies probes into the bloc’s dairy, pork, and brandy markets. The commission termed these probes “unwarranted” and said they “[lacked] sufficient evidence.” Last month, the EU formally filed a complaint with the WTO over China’s investigation into its dairy products.

Josep Borrell, the EU’s top diplomat, has cautioned that a trade war with Beijing may be “unavoidable,” even though Brussels is not interested in that scenario.

In response to the vote, German Finance Minister Christian Lindner urged the EU to avoid triggering a trade war with China.

“Despite the vote in favor of possible punitive tariffs against China, Ursula von der Leyen’s EU Commission should not trigger a trade war. We need a negotiated solution,” Lindner wrote on social media platform X.

‘Devastating Blow’

The EU’s decisions align with those of the United States and Canada.

President Joe Biden imposed a 100 percent tariff on EVs shipped from China, quadrupling the previous 25 percent tariffs, while Canada also adopted a similar measure last month.

With a growing number of countries taking action in response to China’s unfair trade practices, Mario Draghi, the former head of the European Central Bank, warned in his report that Chinese overcapacity in EVs and other green technology would be redirected toward the EU market.

Moreover, the market share of Chinese EVs has seen a significant surge in recent years, from 1 percent in 2021 to 20 percent in 2023, according to the commission. The surge has triggered concerns reminiscent of the EU’s past experience of being dumped with below-cost solar panels from China more than a decade ago. The influx of Chinese solar panels, which remains high today, has led to job losses and bankruptcies among EU competitors.

The EU aims to avert a similar scenario for its EV producers. The EU automotive industry is responsible for nearly 14 million jobs, roughly 6 percent of the bloc’s total employment.

The commission has made it clear that extra duties on Chinese EVs are not intended to completely block their entry into the EU market. Rather, these tariffs are designed to address the “substantial unfair competitive advantage” that Chinese automakers have due to the state subsidy schemes.

Analysts, however, doubt that these tariffs will shield EU automakers from the threat of being edged out by cheap Chinese vehicles.

The EU’s potential tariffs may “only have a slight impact on the sales of Chinese EVs in Europe because the prices of Chinese EVs are still cheaper than those made in Europe,” Wang Shiow-Wen, a research fellow on supply chain security at Taiwan’s Institute for National Defense and Security Research, told The Epoch Times before the Oct. 4 vote.

Despite this, Wang said the EU’s decision to align with the United States in imposing tariffs could create additional pressure on China’s EV industry and struggling economy.

“If exports to Europe are blocked, an increasing number of Chinese electric vehicle manufacturers, who are already grappling with intense competition in the Chinese market, may be forced into bankruptcy. This would further exacerbate the economic challenges faced by China,” she said.

David Huang, a U.S.-based economic researcher and commentator, described the EU’s potential tariffs as a setback for the entire Chinese EV industry.

Huang pointed out that China sees EVs, batteries, and solar panels as crucial to its economic development and the country wants to boost its global export market share by promoting these “new three“ industries.

With the EU’s tariffs looming, Chinese EVs may “only be able to export to countries in Asia, Africa, and Latin America in the future,” Huang told The Epoch Times. “This could deliver a devastating blow to China’s grand strategy” and the future of these key industries.

Luo Ya contributed to this report.