EU slaps tariffs on Chinese electric vehicles

Brussels — The EU will impose tariffs of up to 37.6% from Friday on imports of electric vehicles (EVs) made in China, EU officials said, ratcheting up tensions with Beijing in Brussels’ largest trade case yet.

There is, however, a four-month window during which the tariffs are provisional and intensive talks are expected to continue between the two sides as Beijing threatens wide-ranging retaliation.

The European Commission’s provisional duties of between 17.4% and 37.6% without backdating are designed to prevent what its president, Ursula von der Leyen, has said is a threatened flood of cheap EVs built on state subsidies.

The rates, laid out in a 208-page document published on Thursday, are almost exactly the same as those announced on June 12. The EU’s executive arm made slight adjustments after companies identified minor calculation errors in the initial disclosure.

Beijing said then it would take “all necessary measures” to safeguard China’s interests. These could include retaliatory tariffs on exports to China of products such as cognac or pork.

EU trade chief Valdis Dombrovskis said there is no basis for China to retaliate. “Our aim is to ... ensure fair competition and level playing field,” he said in an interview with Bloomberg.

The EU anti-subsidy investigation has nearly four more months to run. At the end of it, the European Commission could propose “definite duties”, typically applying for five years, on which EU members would vote.

“Those talks with China are ongoing and indeed should a mutually beneficial solution emerge, we can also find ways not to apply at the end of the day the tariffs,” Dombrovskis said. “But it is very clear this solution (would) need to solve that market distortion that we are now having ... and it needs to be market compliant.”

China’s commerce ministry said on Thursday both sides have so far held several rounds of technical talks over tariffs on the issue. “We hope that the European and Chinese sides will move in the same direction, show sincerity, and push forward with the consultation process as soon as possible,” said spokesperson He Yadong.

Chinese EV maker BYD will face duties of 17.4%, Geely 19.9% and SAIC 37.6%, the EU said on Thursday. These are on top of the EU’s standard 10% duty on car imports.

Companies deemed by the EU to have co-operated with the anti-subsidy investigation, including Western carmakers Tesla and BMW, which manufacture in China, will be subject to 20.8% tariffs and those that did not co-operate a rate of 37.6%.

Criticism

Europe’s biggest carmaker, Volkswagen, was swift to criticise Thursday’s announcement. “The negative effects of this decision outweigh any benefits for the European and especially the German automotive industry,” a Volkswagen spokesperson said in a statement.

Motor industry executives have warned against the tariffs, fearful of counter-tariffs or other measures that could affect the competitiveness of their cars in China when they are already struggling to keep up with a growing number of domestic competitors in the EV market. German carmakers made a third of their sales last year in China.

The European Commission has estimated Chinese brands’ share of the EU market has risen to 8% from below 1% in 2019 and could reach 15% in 2025. It says prices are typically 20% below those of EU-made models.

European policymakers are keen to avoid a repeat of what happened with solar panels a decade ago, when the EU took limited action to curb Chinese imports and many European manufacturers collapsed.

The issue will be put to EU members in an advisory vote in the coming weeks, the first official test of support in the European Commission’s case, which is the first trade case of this kind. Though it initiated its investigation without an industry complaint, EU members are wavering over whether to back the additional tariffs, highlighting Brussels’ challenge in getting support for the case.

The Chinese Passenger Car Association has said the tariffs would have a modest effect on the majority of Chinese firms.

The rates are far lower than the 100% tariff Washington plans to apply to Chinese EV imports from August.

Reuters