The EU imposed on Thursday, July 4, as a precautionary measure up to 38% additional customs duties on imports of Chinese electric vehicles, ahead of a final decision in November, the European Commission announced, accusing Beijing of having illegally subsidized its manufacturers.
These new so-called “compensatory” customs duties, which are added to the 10% taxes already applied by the European Union to vehicles manufactured in factories in China, will come into force from Friday. Following a wide-ranging anti-subsidy investigation launched in October 2023, Brussels announced these new duties on June 12, while beginning talks with Beijing to try to resolve the problems identified and defuse the risks of a trade war.
A dialogue is still possible
The European executive now has up to four months to decide whether to impose definitive tariffs, leaving open a window for dialogue with China. These definitive duties would be valid for five years. Brussels is following in the footsteps of the United States, which announced in mid-May an increase in customs duties on Chinese electric vehicles to 100%, compared to 25% previously.
The European car industry, a champion of petrol and diesel engines, fears that its factories will disappear if it fails to stem the announced rise of Chinese models that have a head start in the electric vehicle sector. Electric vehicles from China account for almost 22% of the European market, compared with almost 3% three years ago, according to industry estimates. Chinese brands account for 8% of electric vehicles sold in the EU.
Based on its investigation, Brussels believes that the battery electric vehicle sector in China “benefits from unfair subsidies, posing a threat of economic damage to European producers.”
“Contacts continue”
“Consultations with the Chinese government have intensified in recent weeks,” including exchanges between European Commissioner Valdis Dombrovskis and Chinese Trade Minister Wang Wentao, the Commission also explained in a press release. “Contacts at technical level are continuing with a view to reaching a solution (…) that adequately addresses the EU’s concerns,” it insisted.
Brussels will impose countervailing duties of 17.4% on Chinese manufacturer BYD, 19.9% on Geely and 37.6% on SAIC, with different amounts depending on the levels of public subsidies received. Compared to the levels announced on 12 June, these provisional duties have been slightly reduced, according to comments submitted by the targeted companies. Other manufacturers will be subject to an average additional duty of 21% if they cooperated with the investigation or 37.6% otherwise.
Germany, which is heavily involved in China, had fought with Sweden and Hungary to avoid sanctions over the issue, fearing retaliation, in unison with the concerns of German carmakers Audi, BMW, Mercedes and Volkswagen, which have made around 40% of their global sales in China. France and Spain, by contrast, pushed for proportionate measures.
“Purely protectionist behavior”
These “countervailing” duties will help curb imports of Chinese electric vehicles without blocking them completely, according to the EU, which claims to respect World Trade Organisation (WTO) rules. In this way, it hopes to protect a sector that employs 14.6 million people in the EU and at the same time avoid a deadly conflict with its second largest economic partner after the United States.
However, after the announcement on June 12, Beijing immediately denounced the Europeans’ “purely protectionist behaviour”, threatening to “take all measures to firmly defend their legitimate rights”. This skirmish is part of a broader context of trade tensions between the West and the Asian giant, which is also accused of destroying competition in several other sectors, such as wind turbines, solar panels and even batteries.
Beijing announced in January an investigation targeting all wine spirits imported from the European Union, including cognac. Wine, dairy products, pork and high-engine cars are also in the crosshairs, according to Chinese state media. China overtook Japan last year as the world’s leading car exporter: it invested early in batteries, the technological heart of electric vehicles that it has made its specialty, and in Europe Chinese brands took off quickly thanks to competitive tariffs.
Source: BFM TV
