The European Union is the latest actor to impose punitive tariffs against Chinese electric vehicles (EVs), following a vote by its members on Friday. Western governments—including Canada and the U.S., which previously imposed 100 percent tariffs on Chinese EVs—are concerned about China’s dominance in the global EV industry and what that means for their domestic markets. The European Commission stated that China’s spare production capacity of three million EVs each year, which need to be exported, is twice the size of the E.U. market and, in the absence of intervention, seems likely to reach Europe. Lorne Cook at the Associated Press provided statistics on the E.U.’s new tariffs against Chinese EVs:
The duties on Chinese manufacturers, if applied, would be 17% on cars from BYD, 18.8% on those from Geely and 35.3% for vehicles exported by China’s state-owned SAIC. Geely has brands including Polestar and Sweden’s Volvo, while SAIC owns Britain’s MG, one of Europe’s bestselling EV brands.
Other EV manufacturers in China including Western companies such as Volkswagen and BMW would be subject to duties of 20.7%. The commission has an “individually calculated” rate for Tesla of 7.8%.
[…] According to the commission, Chinese-built electric cars jumped from 3.9% of the EV market in 2020 to 25% by September 2023, in part by unfairly undercutting EU industry prices. [Source]
The new tariffs come on top of an existing 10 percent import duty for cars. The tariffs are scheduled to come into force on October 31 and run for five years, unless China and the European Commission reach an agreement before the end of the month. Their respective technical teams are due to resume negotiations on Monday. The Commission stated that any solution would have to be fully compatible with World Trade Organization (WTO) rules, remedy “the injurious subsidization” by China, and be “monitorable and enforceable.” But as Finbarr Bermingham reported for the South China Morning Post, the prospect of a deal to avoid these tariffs appears unlikely:
Any deal is likely to focus on EV import pricing, but it would likely be technically complex to structure and difficult to enforce. For example, to comply with WTO rules, such a deal would have to be struck without government involvement – a tricky ask when some of the companies involved are state-owned and some of the negotiators have been Chinese officials.
Even if a price arrangement was reached with an individual company, it would probably not stop the tariffs becoming law. Instead, it would give that company a reprieve from the punitive duties in return for a price commitment.
Should that commitment be breached, the tariffs would snap back into place. Meanwhile, the duties would still be collected on imports of models made by companies that have not struck a deal. [Source]
The Chinese Ministry of Commerce denounced the European Union vote, stating: “China hopes that the EU will recognize that imposing tariffs will not solve any problems, but will only shake the confidence of Chinese companies and deter them from investing in and cooperating with the EU.” Previously, it had criticized the E.U.’s move as “naked protectionist behavior.” Following the E.U.’s provisional vote on the matter over the summer, China threatened retaliatory measures against Europe’s dairy, brandy, and pork industries.
“While EU member states more or less agree that there is a security risk that undermines the bloc’s competitiveness in the long run, there is still division over how aggressively the EU should push back against those risks,” Zsuzsa Anna Ferenczy, an expert on EU-China relations at National Dong Hwa University in Taiwan, told VOA. Germany, whose auto manufacturing industry is heavily dependent on exports to China, was a vocal opponent of the vote. German Finance Minister Christian Lindner argued that the Commission “should not trigger a trade war. We need a negotiated solution.” Hungarian Prime Minister Viktor Orban, who has close relations with China, also stated, “What they are making us do right now, or what the EU wants to do, is an economic cold war.” Jorge Liboreiro from Euronews reported on the divisions in how E.U. countries voted on the issue:
The outcome of Friday’s vote was not publicly available, although several diplomats told Euronews how each member state positioned itself:
- 10 were in favour: Bulgaria, Denmark, Estonia, France, Ireland, Italy, Lithuania, Latvia, the Netherlands and Poland. (45.99% of the EU population)
- 12 abstained: Belgium, the Czech Republic, Greece, Spain, Croatia, Cyprus, Luxembourg, Austria, Portugal, Romania, Sweden and Finland. (31.36%)
- Five were against: Germany, Hungary, Malta, Slovenia and Slovakia. (22.65%)
The high number of abstentions reflects long-standing qualms about how Europe should stand up to China. Although the political consensus says that Beijing’s unfair trade practices merit a forceful, united response, threats of commercial retaliation appear to have dampened the resolve of many capitals as the make-or-break date neared closer. [Source]
