The European Union announced on Wednesday its decision to impose additional tariffs ranging from 17.4 percent to 38.1 percent on electric vehicles (EVs) imported from China. This move aims to protect European manufacturers from what the EU considers unfair competition due to heavy subsidies from the Chinese government.
This announcement follows a similar action by the United States, where President Biden recently increased tariffs on Chinese EVs to 100 percent. The escalating trade tensions reflect growing concerns over the influx of Chinese green technology products into global markets, potentially threatening local industries in both regions.
The challenges facing traditional automakers in Europe and the US are significant as they compete with emerging Chinese companies. These companies, established with a focus on EVs, benefit from significantly lower production costs. Unlike their US counterparts, many European automakers have deep ties with the Chinese market, which complicates their position. Vehicles produced by these European firms in China will also be subject to the new tariffs, raising concerns about potential retaliation from China, higher market prices, and a drop in demand for battery-powered cars.
The new tariffs, effective from July 4, 2024, come on top of the existing 10 percent duties and specifically target three leading Chinese manufacturers: BYD, Geely, and SAIC. The tariff rates were determined based on the level of cooperation these companies had with European officials during an investigation into the extent of government support they receive.
Other automakers with production facilities or joint ventures in China, including some European companies, will face tariffs of 21 percent or 38.1 percent, depending on their cooperation with the investigation. The European Union justified its decision by stating that the investigation, which began on October 4, found substantial evidence of unfair subsidies in the Chinese EV supply chain. This influx of subsidized Chinese imports at artificially low prices poses a significant threat to the EU industry.
China has criticized the EU’s decision, calling the tariffs unjustified and accusing the EU of “weaponizing economic and trade issues.” The Chinese Ministry of Commerce warned that these measures could harm bilateral economic and trade cooperation.
The automotive sector is a critical part of the EU economy, providing nearly 13 million jobs across the 27-nation bloc. The EU, the world’s second-largest market for EVs after China, saw imports of Chinese electric cars surge to $11.5 billion in 2023, a significant increase from $1.6 billion in 2020. Chinese brands now account for 19 percent of the European EV market. Despite the tariffs, Europe remains open to dialogue with Chinese officials to resolve the dispute. Senior EU communications officials emphasized that the bloc’s intention is to protect its industry, not to escalate trade conflicts unnecessarily.
The new tariffs are expected to come into force next month, with a final decision anticipated by November, to be enforced for a period of five years.