EU Imposes Immediate Steep Tariffs on Chinese Electric Vehicles
the EUThe European Commission has announced a significant decision: steep tariffs on China-made battery electric vehicles (BEVs) will take effect on July 5. This move is set to redefine the relationship between the EU and China. And it may provoke retaliatory measures from Beijing against European manufacturers.
The decision follows a nine-month investigation, that uncovered extensive subsidies across the entire supply chain of Chinese-produced BEVs. Officials revealed that public funds were used at every stage. From mining raw materials needed for batteries, to the shipping services delivering finished products to Europe. These subsidies allow Chinese manufacturers to offer BEVs at significantly lower prices than those produced within the EU, where energy and labor costs are higher.
Market Impact and Economic Threat
The price disparity has led to a rapid increase in imports of Chinese BEVs. The numbers grew from a 3.9% market share in 2020 to 25% by the end of 2023, according to the European Commission. This influx of low-cost imports poses a “threat of economic injury” to the EU industry. It can potentially result in severe financial losses and jeopardizing over 12 million direct and indirect jobs.
To counteract the unfair advantage provided by subsidies, the EU will impose differentiated duties. They will be based on the parent company, annual turnover, and the suspected amount of subsidies received. A list of tariffs will be added to the existing 10% rate: BYD: 17.4%, Geely: 19.9%, SAIC: 37.6%, other cooperating BEV producers, including Tesla and BMW: 20.8%, non-cooperating BEV producers: 37.6%.
For the time being, these measures are provisional. Customs authorities will request bank guarantees from Chinese exporters, so end customers might not notice immediate changes in prices.
Political and Economic Reactions
Member states will cast a non-binding vote in two weeks to gauge political sentiment. The tariffs will remain in place until the EU makes a final decision in four months. But if at least 15 member states, representing 65% of the EU’s population, oppose them, then they can overturn the measures.
Germany and Hungary, both with strong economic ties to China, will probably show resistance to the tariffs. The German Association of the Automotive Industry (VDA) has criticized the tariffs. They argued it’s not a suitable measure to enhance competitiveness, and could lead to a “lose-lose situation.” Particularly, this issue can impact on joint ventures like those between Volkswagen, General Motors, and SAIC.
Conversely, France and Italy support the additional levies, indicating that intense political negotiations will preceed the final vote in November.
The EU’s imposition of steep tariffs on Chinese BEVs marks a pivotal moment in international trade relations. While aimed at protecting the EU industry from unfair competition, the decision is poised to spark significant political and economic debates within the bloc and could lead to retaliatory actions from China. The outcome of the November vote will be critical in determining the future landscape of the EU’s automotive industry and its global trade dynamics.
