EU to raise tariffs on Chinese EVs

The European Commission is poised to announce higher tariffs on Chinese electric vehicles (EVs), sparking negotiations aimed at mitigating the impact on China’s booming EV industry, Reuters reported on Wednesday.

These tariffs, expected by June 5, could cost Chinese EV manufacturers billions of dollars in additional expenses. This will follow the ongoing sharp escalation of trade war between the US and China after US President Joe Biden launched on May 14 a new set of tariffs on Chinese goods, including a quadrupling of the tariff on electric vehicles (EVs) that brings the rate to 100 per cent. It did not take long for Beijing to retaliate by launching an anti-dumping probe into chemical imports from the United States, the European Union, Japan, and Taiwan.

For the EU’s anticipated rise in tariffs, the reason behind the move is that both Europe and China seek concessions. Beijing aims to sustain profitable exports to the EU amid shrinking margins domestically, while European automakers seek access to China’s auto market and EV partnerships to reduce costs.

An additional 10 per cent in EU tariffs, on top of the existing 10 per cent levy, could mean an extra $1 billion in costs for Chinese EV exporters, based on 2023 trade data, with expectations of further growth as exports to Europe expand.

China is preparing countermeasures, including potential hikes in tariffs on large-engine car imports to 25 per cent and lowering tariffs on EU auto imports from 15 per cent to 10 per cent.

The European Commission’s warnings to prominent Chinese automakers like BYD, SAIC, and Geely signal potential higher tariffs for those companies, with implications for the broader Chinese auto industry.

Despite objections from Chinese trade groups about flawed investigations, there’s room for negotiation. European automakers, including Volkswagen and BMW, are investing billions to expand in China, where almost 29 per cent of cars made by German automakers were sold in 2023.

While Europe remains a crucial market for Chinese EV makers, they’re also investing in Europe, with companies like BYD and Chery Auto establishing production plants in Hungary and Spain, respectively. Battery makers like CATL are ramping up production in Europe, aiding initiatives like France’s “battery valley.”