EU’s Approval of EV Tariffs Condemned by Beijing, Chinese and German Carmakers

The European Union's (EU) recent decision to impose additional import tariffs on Chinese electric vehicles (EVs) has faced backlash from both Chinese and German carmakers, as well as criticism from the Chinese government. The move has stirred debate on the need for Chinese automakers to bolster investment within the EU market to mitigate potential risks posed by these protectionist measures [para. 1][para. 2]. Experts suggest that localizing production could be an effective way for Chinese EV manufacturers to navigate the challenges posed by the EU’s trade policies [para. 2][para. 3]. Some Chinese car manufacturers have already started increasing their investment in European production facilities. Notably, BYD Co. Ltd. has initiated plans to establish a factory in Hungary, and Chery Automobile Co. Ltd. acquired a manufacturing facility in Barcelona [para. 4][para. 5].

The escalation in tariffs, endorsed by the EU following a vote among member states, involves definitive countervailing duties on imported Chinese-made battery electric vehicles (BEVs), ranging from 7.8% for Tesla Inc. models manufactured in China to 35.3% for vehicles from other companies like SAIC Motor Corp. Ltd. that did not cooperate with the EU investigation [para. 6][para. 7]. These new tariffs come on top of the existing 10% import duties for cars [para. 8]. The EU’s intent behind these tariffs, provisionally announced back in June, revolves around countering the alleged undercutting of EU car manufacturers due to substantial state subsidies received by Chinese firms [para. 9].

In response, the Chinese government and significant players in the automotive industry have voiced strong opposition. China’s commerce ministry labeled the EU's tariffs as a violation of World Trade Organization rules, arguing that they disrupt international trade, hinder cooperation, and pose challenges to environmental advancement [para. 10]. Additionally, leading automotive companies, including Geely, BMW, Mercedes-Benz, and Volkswagen, have expressed concerns that such measures could escalate trade conflicts and ultimately harm consumer and corporate interests on both sides [para. 11][para. 13]. Notably, German carmakers, wary of possible backlash from China, urged faster reconciliation to avoid escalating tensions [para. 12].

The EU maintains that it is working towards finding alternative solutions with China that comply with World Trade Organization (WTO) standards and adequately address the subsidization issues identified during their investigations [para. 14]. Tariffs are regarded as the most viable albeit uncomfortable option in addressing the EU's trade challenges with China given the existing toolkit, although alternative measures like price floors and quotas have been considered [para. 15]. Notably, a proposed initiative from a group of Chinese carmakers to avert tariff hikes by setting minimum prices for their vehicles was rejected by the European Commission [para. 16].

In advocating dialogue over confrontation, the European Union Chamber of Commerce in China has stressed the importance of bilateral negotiations to resolve trade disputes and promote fair competition [para. 17]. Emphasizing the value generated by the Europe-China relationship in the past, they suggest that there remains significant potential for creating value through balanced cooperation moving forward [para. 18].