EU to Go Ahead With New Tariffs on China EVs

"The European Union will move ahead with tariffs of up to 45% on electric vehicles made in China, defying pleas from some European auto executives who fear retaliation from Beijing and an escalating trade war.

EU member states voted Friday to impose the new import duties that will apply for the next five years in a move aimed at protecting European carmakers amid rising competition from Chinese-made vehicles.

The move comes after the European Commission, the EU's executive arm, said earlier this year that the Chinese government unfairly subsidizes EV companies at a level that undercuts competition, allowing carmakers in China to sell EVs for less than European-made vehicles. The commission said Friday that it had obtained the necessary support for the adoption of tariffs, despite disagreement among member states on the issue and intense Chinese lobbying in recent weeks.

Several EU member states voted against the tariff plan, including Germany, according to diplomats familiar with the process. Under EU rules, the commission is allowed to move ahead with the tariffs unless a qualified majority of 15 countries representing 65% of the EU's population vote against the plan.

China's Ministry of Commerce blasted the tariffs as "unfair, non-compliant and unreasonable protectionist practices," warning that it would take countermeasures to safeguard the interests of Chinese companies. The duties will hinder China-EU cooperation and set back the EU's climate agenda, the Chinese ministry said.

The ministry also said it is willing to continue discussing how to resolve the trade dispute through negotiations.

For months, Beijing has turned to a mix of carrots and sticks in a bid to stop the duties, promising on the one hand billions of dollars in investments and, on the other, launching investigations into European exports of brandy, dairy and pork products. Chinese officials also met with auto-industry representatives to discuss the possibility of raising tariffs on large-engine European vehicle imports, many of which are made in Germany.

Several German car companies, including autos giant Volkswagen, had come out publicly against the tariffs, fearing reprisals from China.

Mercedes-Benz said after the vote that it considered the tariffs "a mistake that can lead to far-reaching negative consequences," and urged the EU and China to reach a negotiated solution. 

China is a key market for many European carmakers, including Volkswagen, Mercedes-Benz, BMW and Stellantis. But the automakers are increasingly battling fierce pricing pressure there from homegrown manufacturers like BYD and Geely.

In Europe, a cooling EV market has also seen competition for customers intensify, especially as Chinese manufacturers have gained a foothold in the region and driven prices lower as they fight for a share of the market.

EU officials said that Friday's vote isn't necessarily the final word on the trade dispute with China and that the door remains open for a potential solution. "The EU and China continue to work hard to explore an alternative solution," the commission said.

According to the commission, the share of EV imports into the EU from China rose to 27.2% in the second quarter of 2024 from 3.5% in 2020, while EVs imported by Chinese brands alone, rather than through joint ventures, rose to 14.1% in the second quarter of this year from 1.9% in 2020." [1]

1. EXCHANGE --- EU to Go Ahead With New Tariffs on China EVs. Chopping, Dominic; Kim Mackrael.  Wall Street Journal, Eastern edition; New York, N.Y.. 05 Oct 2024: B.9.