EU to hit Chinese electric vehicles with extra tariffs of up to 38%

BRUSSELS – The European Commission told automakers on June 12 that it would impose extra duties of up to 38.1 per cent on imported Chinese electric cars from July, in a move that China called protectionist but its car industry dismissed as one without a major impact.

Less than a month after Washington quadrupled duties for Chinese electric vehicles (EVs) to 100 per cent, Brussels said it would set additional tariffs of 17.4 per cent for BYD, 20 per cent for Geely and 38.1 per cent for SAIC, on top of the existing 10 per cent, over what it said were excessive subsidies.

That equates to billions of euros of extra costs for the carmakers at a time when they are struggling with slowing demand and falling prices at home, according to Reuters calculations based on European Union trade data in 2023.

The move comes as European automakers are being challenged by an influx of lower-cost EVs from Chinese rivals. Shares in some of Europe’s biggest carmakers, which make a big portion of their sales in China, fell on fears of Chinese retaliation. Some like BMW will also now incur duties on their EVs made in China and sold in Europe.

The European Union Chamber of Commerce in China said on June 12 it believes that if tariffs are to be levied, it should be done proportionately and in a manner that is both transparent and consistent with World Trade Organisation rules.

“The provisional announcement of tariffs underlines the urgency of finding solutions to the very real imbalances in the commercial relationship between Europe and China, in particular if such imbalances arise from factors not reconcilable with the principles of free and fair trade,” the chamber said.

In response to the latest move, Chinese Foreign Ministry spokesman Lin Jian said: “This anti-subsidy investigation is a typical case of protectionism.”

Mr Lin added that the tariffs would damage China-EU economic and trade cooperation, and the stability of the global automobile production and supply chain.

China urges the EU to support free trade, Mr Lin said, adding that Beijing would take all necessary measures to “firmly safeguard” its legitimate rights and interests.

The China Passenger Car Association seemed less concerned, though.

“The EU’s provisional tariffs come basically within our expectations, averaging around 20 per cent, which won’t have much of an impact on the majority of Chinese firms,” the association’s secretary-general Cui Dongshu said.

“Those exporting China-made EVs that include Tesla, Geely and BYD still have huge potential for development in Europe in the future,” Mr Cui said.

China’s Commerce Ministry said it would closely monitor the development and take all necessary measures to safeguard the legitimate rights of Chinese companies.

Beijing

has already launched an anti-dumping investigation

into mostly French-made imports of brandy. It also passed a law in April to strengthen its ability to hit back, should the US or EU impose tariffs on exports of the world’s No. 2 economy.

The EU provisional duties are set to apply by July 4, with the anti-subsidy probe set to continue until Nov 2, when definitive duties, typically for five years, could apply. The commission said it would apply rates of 21 per cent for firms deemed to have cooperated with the investigation, and of 38.1 per cent for those it said had not.

Western producers such as Tesla and BMW that export cars from China to Europe were considered cooperating companies.

Mr Margaritis Schinas, a commission vice-president, told a news conference that Chinese-built cars were benefiting from unfair levels of subsidies, threatening EU producers.

“On this basis, the commission has reached out to Chinese authorities to discuss these findings and explore possible ways for resolving the issues identified,” he said.

The indicative tariffs are above analysts’ expectations of between 10 per cent and 25 per cent on Chinese EVs.

BYD, Geely, SAIC and Tesla did not immediately respond to Reuters’ queries on the report.

Some economists said the immediate effect of the additional duties would be very small in economic terms because the EU imported around 440,000 EVs from China in the 12 months ending in April worth €9 billion (S$13 billion), or around 4 per cent of household expenditure on vehicles.

“But the anti-subsidy duties are intended to limit the future growth in EV imports which would otherwise take place rather than to block existing trade,” said Mr Andrew Kenningham, chief Europe economist at Capital Economics.

“The decision marks a big change in EU trade policy because, although the EU has used trade defence measures regularly in recent years, including against China, it has not previously done so for such an important industry. And Europe has been reluctant to engage in the kind of protectionism that the US has deployed since Donald Trump’s presidency,” he said. REUTERS