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The European Union said on Wednesday it would impose additional tariffs of up to 38% 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, which comes a month after President Biden quadrupled US tariffs on Chinese electric vehicles to 100%, opens another front in escalating trade tensions with China amid growing fears about a glut of Chinese products from green technology flooding global markets.
The actions of the European Union and the United States also reflect the Challenges faced by traditional automakers in Europe and the United States from emerging Chinese companies founded with a focus on electric vehicles and much lower cost bases than their rivals in the West.
But unlike American automakers, several of their European counterparts are deeply intertwined in the Chinese market and their cars produced there will also be subject to higher tariffs.
They have criticized the European Union’s decision to increase tariffs from 10%, fearing retaliation from China as well as a increase in prices throughout the market and one drop in demand of battery-powered cars.
The increases announced Wednesday, which are added to existing 10% tariffs, are preliminary and They will come into effect on July 4. They range from 17.4% to 38.1% for three major Chinese manufacturers, including BYD, Geely and SAIC. The tariffs were calculated based on the level of cooperation with European officials, who have spent recent months investigating the level of Chinese government support for these companies.
Other automakers that produce electric vehicles in China, including European companies with factories or joint ventures there, face a tariff of 21% or 38.1%, the EU said. Those fees also depend on your cooperation with the investigation.
The European Union defended the action, saying in a statement that an investigation launched on October 4 had found that the electric vehicle supply chain in China “largely benefits from subsidies unfair in China, and the influx of subsidized Chinese imports at artificially low prices. It therefore presents a clearly foreseeable and imminent threat of harm to the EU industry.”
China denounced the tariffs for lacking “factual and legal basis” and “weaponizing economic and trade issues,” said He Yadong, spokesman for the Ministry of Commerce. “This is not in line 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 Comission, The executive branch 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 almost 13 million jobs throughout the 27-nation bloc. It is the world’s second largest market for electric vehicles after China.
China’s electric car imports last year reached US$11.5 billion, in front of the US$1.6 billion of 2020.
Around the 37% of all electric vehicles imported to Europe come from China, including cars manufactured by Tesla, BMW and Dacia, owned by Renault. Chinese brands represent the 19% of the European electric vehicle market. Their number has been growing steadily, according to a study by the Rhodium Group.
Europe is open to collaborating with Chinese officials to resolve the dispute, said senior EU communications officials, who insisted the bloc was not seeking to introduce higher tariffs for the sake of it, but was acting to defend the national industry of its members.
teslawhich produces its Model 3 and Model Y in Shanghai for the European market, requested that the tariffs on their cars be calculated individually, EU officials said. Other companies seeking an individual review have nine months to file their petition, although none had done so at the time of Wednesday’s announcement.
Ursula von der Leyen, president of the European Commission, said last month that Europe was adopting a “tailored approach” to calculate your tariff increase from the existing 10%, which “would correspond to the level of damage” caused. The tariffs for the other exporting companies will be based on the weighted average of the duty imposed on the three that were investigated.
Before the announcement, China had warned it could retaliate by raising tariffs on gasoline cars imported from Europe and agricultural and aviation products. China already applies a 15% tax on all electric vehicles imported from Europe.
These include cars manufactured by bmw and Volkswagenfor example, who not only sell to China but also have large production facilities there.
German automakers fear the tariffs will drive up prices in Europe and provoke retaliation from the Chinese, ultimately hurting them in both markets. The German Chancellor Olaf Scholz criticized the increase in tariffs last week during a visit to a plant in Rüsselsheim, owned by Stellantis’ Opel.
““Isolation and illegal customs barriers make everything more expensive and everyone poorer.”Scholz said. “Let’s not close our markets to foreign companies, because we don’t want that for our companies either.”
Economic experts warned that increasing tariffs up to 20% could disrupt trade routes. The Kiel Institute for the World Economy calculated that such an increase It 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 Europe’s traditional automakers in producing components such as electronic modules and battery cells means that Europe would need to impose tariffs of at least 50% to be effective.
Even if European automakers could close that gap, a drop in the number of Chinese models will increase the general price of electric vehicles, given higher labor and production costs, the institute said.
“It is by no means a foregone conclusion that European automakers will fill the void,” said Julian Hinz, a trade researcher at the institute. Another threat to European producers, he said, is the reality that Chinese manufacturers already have plans to expand production to Europe.
BYDthe leading Chinese automaker, has set a goal of becoming one of the leading electric vehicle manufacturers in Europe by 2030. Late last year, it named Hungary as the place where it plans to build its first assembly plant in the European Union. The company said it was considering establishing a second factory elsewhere in Europe.
Cherryanother Chinese manufacturer, announced last month that would open a plant near Barcelonaas part of a joint venture with the Spanish EV Motors.
Other European countries are also eager for Chinese automakers to move into their territory, with the idea that they would create jobs and strengthen national supply chains.
President Emmanuel Macron France has made a concerted effort to attract more battery production, including from Chinese companies, to a northern region where factory jobs have been in decline. Bruno Le Maire, Minister of Finance of France, has gone even further by declaring that The Chinese automotive industry is “very welcome in France.”
Faced with the prospect of Chinese companies expanding in their backyard, many European automakers say they They are more concerned about increasing their competitiveness than about tariffs.
Volkswagenwhich has several production and research sites in China, said it was concerned about the tariffs, which the company considers harmfulespecially at a time when demand for electric cars in Europe was falling.
“The increase in import tariffs in the EU “could trigger a fatal dynamic of measures and countermeasures and lead to 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 comment. The commission would then have until November before the final tariffs take effect, for a period of five years.
The New York Times
