The European Union (EU) has decided to impose a tariff of up to 45.3% on Chinese electric vehicles. In response, China has announced its intention to take all necessary measures. However, rather than an extreme trade war, it seems likely that negotiations over the selling prices of electric vehicles will continue.
According to Reuters on the 29th (local time), the EU Commission has finalized countervailing duties on imports of Chinese electric vehicles following an anti-subsidy investigation. This will apply from the 30th for the next five years, adding a 7.8–35.3 percentage point surcharge to the existing standard tariff rate of 10%, making the final tariff rate range from 17.8% to 45.3%.
The tariff varies depending on the company or the level of cooperation with the EU investigation. Tesla, which has a manufacturing plant in Shanghai, will have the lowest tariff rate of 17.8%. The highest tariffs will apply to SAIC Motor and companies that did not cooperate with the investigation.
The tariff increase was approved and came into effect a year after the EU started investigating China’s subsidy practices.
The EU began its anti-subsidy investigation in September last year, asserting that China’s excessive subsidies led to the export of cheap electric vehicles to Europe, undermining fair competition in the market. In response, China proposed to set a “floor price” for exports instead of paying tariffs. Despite eight rounds of working negotiations, as they couldn’t narrow the differences, the EU pressed ahead with imposing high tariffs.
On the same day, an EU senior official told reporters that almost all sectors still have differing views on the factual aspects. The EU stated that it is willing to continue negotiations to find a mutually agreeable solution even as the high tariffs take effect. However, significant differences between the two sides make finding a “breakthrough” challenging, according to some analyses.
China’s Ministry of Commerce released a statement on its website, announcing that it neither agrees with nor accepts the EU’s conclusion.
The spokesperson for China’s Ministry of Commerce mentioned that they have already filed a complaint under the World Trade Organization (WTO) dispute settlement mechanism and stated that China would continue to take all necessary measures to steadfastly defend the legitimate rights and interests of Chinese companies.
China announced anti-subsidy investigations on EU pork and dairy imports in June and August, respectively, and earlier this month, announced temporary anti-dumping measures on EU brandy.
However, China is paying attention to the EU’s statement that it will continue negotiations regarding the selling prices of Chinese electric vehicles in Europe. The Ministry of Commerce spokesperson expressed hope that the EU would cooperate constructively in the new phase of negotiations and adhere to the principles of “pragmatism and balance” to address the core concerns of both sides.
The negotiation over electric vehicle selling prices was proposed by Chinese automakers as part of the tariff negotiation process. Instead of tariffs, they propose voluntarily setting the minimum price and quantity of cars exported to Europe. While the EU initially rejected this proposal, it stated it would respond to negotiations even after deciding on tariffs as a legitimate measure against China’s industrial subsidies. Depending on the outcome of the negotiations, the high tariffs could be withdrawn.
Bloomberg, citing an anonymous source, reported that China is focused on securing favorable negotiations for SAIC, a state-owned automaker facing the highest tariffs.
The EU is attempting to establish individual pricing agreements with automotive companies. BYD, which has promised to relocate production bases to Europe, may achieve a favorable outcome. On social media affiliated with Chinese state media, there are posts criticizing the EU’s negotiation with individual automakers as a “divide-and-conquer strategy.”