The European Union (EU) has decided to impose up to a 45.3% “tariff bomb” on Chinese electric vehicles. However, the EU maintains that they will pursue negotiations even if the confirmed duties begin. According to Reuters on the 29th (local time), the European Commission, the EU’s executive body, announced that it has concluded to impose definitive countervailing duties on imports of Chinese electric vehicles for five years following the results of an anti-subsidy investigation. With the rules for implementing the confirmed tariffs published in the afternoon, the increased tariffs will take effect from midnight on the 30th.
Consequently, an additional tariff of 7.8 to 35.3 percentage points (p) will be added to the existing general tariff rate of 10%, resulting in a final tariff rate of 17.8 to 45.3%. The tariff varies depending on the company or whether they cooperated with the EU investigation. Tesla, which has a manufacturing plant in Shanghai, will receive the lowest tariff rate of 17.8%. The highest tariffs will be applied to SAIC (Shanghai Automotive) and companies that did not cooperate with the investigation.
The investigation results were announced approximately a year after the European Commission began its investigation. Ursula von der Leyen, President of the European Commission, announced in her annual policy speech in September last year that an investigation would be conducted, stating that Chinese electric vehicles, supported by unfair subsidies, are being exported to Europe at low prices. During the investigation, China proposed setting a ‘minimum price’ for exports instead of paying tariffs, initiating so-called ‘price agreement’ negotiations.
However, despite multiple working-level negotiations, the two sides failed to narrow their differences, leading to the imposition of high tariffs. A senior EU official told reporters, “Almost all sectors still have differing views on the facts,” indicating the ongoing disagreements.
Furthermore, China’s Ministry of Commerce has recently expressed strong dissatisfaction publicly about the EU engaging in ‘individual negotiations’ with certain companies. They argue that attempting separate price agreement negotiations with individual companies while official discussions with Chinese authorities are ongoing undermines mutual trust.
In response, EU officials dismissed concerns, stating that conducting parallel negotiations is not legally problematic. The EU plans to continue negotiations to find a mutually agreeable solution even after the confirmed tariffs begin to be imposed.
Given the significant differences between the two sides, analysts believe that finding a ‘breakthrough’ will not be easy. There is also a possibility that China might retaliate against the EU with additional trade sanctions. China commenced an anti-dumping investigation on pork imports from the EU in June and started an anti-subsidy investigation on dairy products in August. Earlier this month, they announced temporary anti-dumping measures on EU brandy.
The reactions among EU member states are mixed. Antoine Armand, France’s Minister of Finance and Economy, defended the decision, stating, “The EU is making an important decision to protect and defend our trade interests at a time when our automotive industry needs our support more than ever.”
However, Hildegard Müller, president of the German Automotive Industry Association (VDA), expressed concerns that “additional tariffs are a step back from free trade, negatively affecting Europe’s prosperity, job preservation, and growth.” She warned that “countervailing duties increase the risk of widespread trade conflicts.”