EU Imposes New Tariffs on Chinese Electric Cars
The European Union has announced new customs duties of up to 38% on Chinese electric cars, citing illegal subsidies by the Chinese government. These additional duties, which will start from Friday, come on top of the existing 10% tariffs. The decision follows an extensive anti-subsidy investigation initiated in October 2023. The European Commission aims to finalize its decision by November, leaving room for potential dialogue with Beijing.
Economic Implications and Trade Tensions
The European automobile industry, a leader in gasoline and diesel engines, is concerned about the rapid growth of Chinese electric cars in the market. Chinese electric cars now account for 22% of the European market, up from 3% three years ago. Brussels' investigation concluded that China's electric vehicle sector benefits from unfair subsidies, posing a threat to European producers. The Chinese government has provided substantial financial support to its electric car sector, amounting to at least $231 billion from 2009 to 2022. The EU's move follows the United States, which increased tariffs on Chinese electric cars to 100% in mid-May.
Potential for Dialogue and Future Developments
Despite the imposition of these provisional tariffs, the EU has left the door open for negotiations with Beijing. Both sides have been in discussions to resolve the issue and avoid a trade war. However, last-minute talks between the EU and China failed to produce an agreement. The EU Commission has until November 4 to make a final decision on the tariffs, which would then be valid for five years. Meanwhile, China has announced potential retaliatory measures, including an anti-dumping investigation into EU pork exports and possible tariffs on combustion engine cars with large displacements.
- Germany, which has significant economic ties with China, has expressed concerns over the new tariffs, fearing retaliatory measures that could affect German car manufacturers like Audi, BMW, Mercedes, and Volkswagen. These manufacturers derive nearly 40% of their global sales from China.
- France and Spain, on the other hand, have supported the new tariffs, arguing that they are necessary to protect the European automobile industry. The EU claims that these 'countervailing' duties will help slow down imports of Chinese electric vehicles without completely blocking them, adhering to World Trade Organization (WTO) rules.
- The market share of Chinese electric cars in Europe is growing rapidly. In the fourth quarter of 2023, it was 7.8%. Despite the new tariffs, many Chinese electric vehicle models are expected to remain profitable in the EU market. The tariffs could, however, accelerate the local production of Chinese vehicles and components in Europe.
