EU confirms immediate application of high tariffs on Chinese electric vehicles

This article was originally published in English

Brussels accuses Beijing of providing its carmakers with huge subsidies that lead to artificially low prices and unfair competition.

The European Commission has confirmed what was in the air: high customs duties will be imposed on battery electric vehicles manufactured in China from July 5. This momentous decision risks redefining relations with Beijing and leading to retaliatory measures against European producers.

This measure, announced at the beginning of June, is the result of a in-depth investigation which revealed that subsidies were being injected into the entire supply chain of electric vehicles produced in China. Officials said public money was found everywhere, from the extraction of raw materials needed to make the batteries to the shipping services used to get the finished products to European shores.

The scale of the subsidies allows Chinese producers to offer their vehicles at prices significantly lower than those assembled in the European Union, where energy and labour costs are much higher. The price gap has led to a rapid increase in imports of Chinese-made electric cars: from a market share of 3.9% in 2020 to 25% by the end of 2023, according to the Commission.

This wave of cheap imports represents a “threat of economic harm“for EU competitors that could lead to unsustainable losses and put at risk more than 12 million direct and indirect jobs, the executive warns.

Customs duties are therefore necessary to compensate for the advantage granted by the subsidies.

The decision published on Thursday provides for differentiated duties, calculated according to the parent company, annual turnover and the presumed amount of subsidies received. They will be added to the current rate of 10%.

BYD: 17.4
Geely: 19.9
SAIC: 37.6%.
Other Chinese electric vehicle producers that cooperated with the investigation but were not individually sampled: 20.8%.
Other electric vehicle producers in China that did not cooperate: 37.6%

The introduction of the measures will, for now, be temporary. Customs authorities will ask Chinese exporters for bank guarantees rather than cash, meaning end customers may not immediately notice a change in their pockets.

The tariffs will remain in place until a final decision is made in November, a decision that countries could block with a qualified majority against.

Germany and Hungary are among the countries likely to oppose it, although they are not numerous enough to defeat the initiative (at least 15 member states).

In the meantime, Brussels and Beijing will discuss possible solutions to avoid the permanent introduction of customs duties.

“We continue to engage intensively with China in the search for a mutually acceptable solution. Any negotiated outcome to our investigation must clearly and fully address the EU’s concerns and respect WTO rules.“, said Valdis Dombrovskis, Commission Executive Vice-President responsible for trade, in a statement.

Hopes for a breakthrough are, however, low. Beijing has contested the investigation on both its substance and form, calling it “protectionist act” Who “artificially constructed and exaggerated so-called subsidies“, and promised to “take all necessary measures to firmly defend the legitimate rights and interests of Chinese enterprises“.

Last month, China’s Ministry of Commerce launched a anti-dumping investigation on pork imports from the EU, a move widely seen as a prelude to retaliatory measures. Agriculture and aviation are seen as the sectors most vulnerable to Beijing’s wrath.