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Brussels is pushing ahead with Chinese tariffs on electric vehicles expected to raise more than 2 billion euros a year, ignoring German government warnings that the move risks sparking a costly trade war with Beijing.
The European Commission will notify automakers on Wednesday that it will provisionally impose additional duties of up to 25 percent on imported Chinese electric vehicles starting next month, people familiar with the decision said.
Brussels claims that Chinese EV manufacturers benefit from subsidies that undermine their European rivals.
The tariffs, championed by France and Spain, will raise billions of euros annually for the EU budget as sales of Chinese electric vehicles grow in Europe. China, the bloc’s biggest trading partner, exported 10 billion euros worth of electric cars to the EU in 2023, doubling its market share to 8 percent last year, Rhodium Group analysts said.
Beijing has warned it will retaliate as it seeks to convince a majority of EU capitals to oppose the new tariffs, which would come on top of the bloc’s existing 10 percent levies. Beijing already applies a 15 percent tariff on European electric vehicles.
Germany, Sweden and Hungary have said they do not approve of the move, fearing Chinese retaliation. EU officials say Berlin has put pressure on Ursula von der Leyen, who is seeking a second term as commission chair, to drop the anti-subsidy investigation.
German Chancellor Olaf Scholz recently warned that “isolation and illegal customs barriers . . . In the end it just makes everything more expensive and everyone poorer.”
But intense lobbying by Scholz’s government “hasn’t worked,” said a person briefed on the process. The commission was expected to increase its tariffs to about 35 percent, the person said, still well below the 100 percent tariffs applied by the US.
The additional tariffs in Europe will hit Chinese manufacturers, including BYD and SAIC, as well as companies like Tesla, which have factories in China. The levies may vary from producer to producer, depending on the level of subsidy the EU claims to have identified.
The Kiel Institute, an economic think tank, found that an additional 20 percent tariff on Chinese electric cars would cut imports by a quarter. It calculated that with 500,000 vehicles imported in 2023, this equated to an estimated 125,000 units worth almost $4 billion.
“The decline would be largely offset by an increase in production within the EU and a lower volume of EV exports, which would likely mean noticeably higher prices for end users,” the researchers concluded.
The commission expects that Chinese electric cars will have a 15 percent market share in the EU next year. It says prices are typically 20 percent lower than EU-made models.
Valdis Dombrovskis, EU Trade Commissioner, acknowledged that electric vehicles are crucial to the green transition when he announced the study in October. But he added: “The competition must be fair.”
His department had collected evidence that Chinese automakers and their suppliers received subsidized loans, tax breaks and cheap land, according to officials.
Chinese Foreign Ministry spokesman Lin Jian on Wednesday dismissed the EU’s anti-subsidy investigation as “a typical example of protectionism”, adding that the decision to impose additional tariffs “is contrary to the principles of the market economy and international trade rules”.
“Protectionism has no future,” he said. “Open collaboration is the right way.”
Many EU carmakers have condemned the plan, fearing that China would respond in kind or even block them from its market. European brands accounted for about 6 percent of EV sales in the country in 2022.
Germany exported 216,299 cars to China in 2023, a decline of 15 percent from the previous year; Brands such as Mercedes and Volkswagen also operate factories in the country.
Geely, one of the Chinese companies investigated, owns the Swedish Volvo. Prime Minister Ulf Kristersson has joined Scholz and Hungarian Prime Minister Viktor Orbán, who has fueled Chinese EV investment, in publicly opposing EU tariffs.
The three leaders would have to convince at least 11 other governments to overturn the commission’s decision on tariffs. Other Central European countries such as the Czech Republic and Slovakia are expected to join the opposition.
Food and luxury goods exporters such as Italy are also concerned about reprisals against products from the country.
But France, which pushed for the investigation to protect its own industry and force China to invest in manufacturing there, is unlikely to bow out. Spain, another major automaker, has also indicated it will support the tariffs.
Member States are asked to vote on the rates before November 2. Definitive duties are usually imposed for five years.
Additional reporting by Wenjie Ding in Beijing