Shifting Gears

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The European Union raised tariffs on electric vehicles (EVs) imported from China in a move aimed at protecting the bloc’s automotive industry from unfair competition – but in so doing drew a sharp rebuke from Beijing that could potentially escalate into a trade war, CNN reported.

The new tariffs, ranging from 17.4 to 38.1 percent, are in addition to the existing 10 percent levy – bringing the maximum duty close to 50 percent.

The new duties follow an investigation by the European Commission into Chinese state support for its EV industry last year. The commission concluded that the EV industry in China “benefits from unfair subsidization, which is causing a threat of economic injury.”

BYD, one of the world’s largest EV sellers, faces the lowest additional duty at 17.1 percent, while Geely and SAIC are hit with 20 percent and 38.1 percent, respectively. Other Chinese EV manufacturers cooperating with the investigation will face a 21 percent duty, while non-cooperators will incur 38.1 percent.

Analysts explained that the tariff hike reflects the EU’s protective stance against cheap Chinese imports that threaten local jobs and industries. It coincides with similar actions by the United States, where President Joe Biden recently increased tariffs on Chinese EVs to 100 percent.

Beijing criticized the EU’s decision, accusing it of escalating trade tensions and harming European consumers, according to CNBC.

Chinese officials vowed to defend the interests of Chinese companies, with observers hinting at potential retaliatory measures: These would include increasing tariffs on EU vehicle imports from 15 to 25 percent, as well as targeting other European exports of wine and other luxury goods.

Business analysts noted that European automakers, especially those with significant manufacturing operations in China, face increased costs due to these tariffs. They added that Germany’s car industry heavily relies on China for sales and faces more risks from Beijing’s potential retaliatory actions than other countries.

The EU must decide by November whether to make these tariffs permanent, even as the bloc is divided over them. While France and Spain support the tariffs, Germany opposes them.