The European Union has announced plans to raise tariffs on Chinese electric vehicles (EVs) to 38% from the current 10%, effective July 4, unless a resolution is reached with Beijing regarding subsidies that the EU claims are distorting the market.
The European Commission disclosed on Wednesday that it has engaged Chinese authorities to discuss the findings of its subsidy investigation and to seek a resolution.
The potential tariff hike is part of a broader trade conflict between the EU and China, particularly concerning green technologies.
The EU’s executive body stated that the new tariffs would be implemented if discussions do not yield an effective solution.
This move follows an EU investigation into China’s state support for its automakers, which have benefited from the lower 10% tariff, significantly less than tariffs imposed by countries like the US or India.
The commission argues that Chinese-built EVs are 20% cheaper than European models, contributing to a surge in imports—from 57,000 units in 2020 to over 437,000 in 2023, according to Eurostat.
Brands such as BYD and SAIC have increased their market share in Europe, bolstered by substantial Chinese subsidies that enable them to undercut European prices.
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The tariff threat is the latest development in a series of trade disputes over China’s state support for green tech exports, including solar panels, batteries, and wind turbines. The announcement was not unexpected, with industry insiders acknowledging the investigation’s findings.
Cui Dongshu, secretary-general of the China Passenger Car Association, remarked that the EU’s provisional tariffs were anticipated and would not significantly impact most Chinese firms.
Chinese EV manufacturer Nio expressed strong opposition to the move but reaffirmed its commitment to the European market.
The proposed tariff hike has sparked concerns in Germany, which hosts the EU’s largest automotive sector. Germany’s transport minister cautioned that increasing tariffs could provoke a “trade war” with Beijing.
“The European Commission’s punitive tariffs hit German companies and their top products. Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation,” Volker Wissing said on X.
“As an exporting nation, what we do not need are increasing barriers to trade. We should work on dismantling trade barriers in the spirit of the World Trade Organisation,” added Ola Kaellenius, CEO of German carmaker Mercedes Benz.
