The European Commission has recently announced new tariff rates for battery-operated electric vehicles imported from China, sparking concerns about a potential trade war between the European Union (EU) and China.
The Commission stated on June 12 that it has identified unfair subsidization in the Chinese battery electric vehicles (BEV) value chain, posing a threat of economic injury to EU BEV producers.
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According to a study by the Rhodium Group, EU imports of EVs from China have surged from $1.6 billion in 2020 to $11.5 billion in 2023, accounting for 37% of all EV imports in the bloc. The Commission initiated an anti-subsidy investigation on imports of Chinese BEVs in October 2023, with the new tariffs set to take effect from November 2, 2024.
The additional duties vary across different brands. China’s leading EV manufacturer and exporter BYD will face a 17.4% tariff, while Geely, the parent company of Volvo, will be subject to a 20% tariff. State-owned Shanghai Automotive Industry Corporation (SAIC) will bear the highest tariff at 38.1%. Other EV makers like Tesla will have separate rates following further discussions, and even European carmakers producing BEVs in China will be impacted by the new tariffs.
Different rates
The varying tariff rates are based on the cooperation of companies with the EU’s investigations, with BYD paying a lower tariff for its cooperation, and SAIC facing the higher rate for non-cooperation. These new tariffs are in addition to the existing 10% duty on vehicles imported from China.
Loyle Campbell, a research fellow at the German Council on Foreign Relations (DGAP), highlighted China’s history of problematic industrial policies that have involved extensive subsidies at various levels. He drew parallels with how China dominated the solar industry, leading to an EU anti-dumping investigation in the past.
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The EU’s tariff measures against China have raised concerns in Germany, a key market where a third of exported cars were sold in China in 2023.
The German Association of Automotive Industry (VDA) views these tariffs as a step away from globalization, potentially escalating global trade conflicts. VDA President Hildegard Müller emphasized the importance of free and fair trade, warning about the risks associated with protectionist measures.
VDA President Hildegard Müller said, “The German automotive industry is in favor of free and fair trade. As a matter of principle, any protectionist measure restricts free trade and harbors the risk of trade conflicts ultimately detrimental to all sides.”
‘Not a punishment’
German vice-chancellor Robert Habeck, during his recent visit to China, clarified that the EU tariffs were not intended as a punishment but aimed at leveling the playing field with China.
German automakers BMW, Volkswagen, and Mercedes-Benz have expressed their opposition to the tariffs, highlighting the impact on their operations in China despite enjoying subsidies similar to Chinese carmakers.
China has urged the EU to lift the preliminary tariffs on its BEVs by July 4, criticizing them as protectionist and detrimental to fair competition.
China’s Commerce Ministry has warned of escalating trade frictions and the potential for a ‘trade war’ due to the EU’s actions. Many critics of the EU tariffs have emphasized the need for collaboration with China on climate issues, as transitioning to electric vehicles is crucial for reducing emissions.
While China has not announced auto-related tariffs yet, it has initiated investigations into pork and pig-products imports from the EU, potentially impacting countries like Spain, Denmark, and the Netherlands. Additionally, an anti-dumping investigation into European liquor by China could affect French cognac imports.
(Nimish Sawant is an independent journalist based in Berlin)
