EU Countries Divided on Tariffs for Chinese-Built Electric Vehicles
The European Union is facing challenges in gaining support for its largest trade case yet, as EU countries are wavering over whether to back additional tariffs on Chinese-built electric vehicles. Germany, which heavily relies on sales in China, wants to avoid the tariffs, while France remains a strong supporter. However, a majority of countries are still weighing the pros and cons of the escalating trade dispute.
The issue will be put to an advisory vote in the coming weeks, marking the first official test of support for the case. The EU initiated the probe without an industry complaint, making it the first trade case of its kind. Provisional duties of up to 37.6% on Chinese brands like BYD, Geely, and SAIC, as well as China-made models of Tesla, BMW, and other western automakers, were set to be confirmed on Thursday. Carmakers are bracing for billions of dollars in new costs, potentially slowing their European expansion.
In October, EU members will vote on whether to propose multi-year tariffs at the end of the investigation. These tariffs would be blocked if a “qualified majority” of at least 15 countries representing 65% of the EU population votes against them. France, Italy, and Spain have indicated their support for tariffs, but the Czech Republic, Greece, Ireland, and Poland are still debating the issue.
Germany emphasizes the need for a negotiated solution with China and believes that tariffs will have negative effects that outweigh any benefits. The country’s automakers argue that increasing the cost of EVs for consumers contradicts the EU’s goal of being carbon-neutral by 2050. Tesla has already stated that it will raise prices in response. Furthermore, Beijing’s retaliation could bring additional tariffs on EU exports such as cognac, pork, or luxury cars.
The European Commission justifies the need for tariffs by citing China’s subsidies, cheap loans, and raw materials, which create an unfair advantage. The goal is to establish a level playing field, rather than shut out Chinese car manufacturers entirely, as the United States plans to do with its 100% tariff. Tariffs could also give the EU leverage in negotiations with Beijing and encourage producers to manufacture cars within the EU.
The final positions at the end of the investigation will depend on what China offers in negotiations. Hosuk Lee-Makiyama, director of the European Centre for International Political Economy, suggests that a clear majority in favor of or against tariffs could sway opinions. However, if the case goes to a vote, it indicates that negotiations have failed.
This investigation into electric vehicles may be just the beginning for the EU as it takes a tougher stance on Beijing. Experts believe that the EU’s green and tech companies are lagging behind global rivals, leading to a shift in policies. A 712-page report released by the European Commission in April highlights Chinese state interference and subsidies, providing evidence of China’s noncompliance with international rules. The report covers a wide range of industries beyond traditional ones like steel, including semiconductors, telecom equipment, and renewable energy, potentially opening the door to more cases in the future.
Overall, the EU’s decision on tariffs for Chinese-built electric vehicles will have significant implications for trade relations between the two entities. While some countries are hesitant due to potential negative effects and retaliation from China, others believe that tariffs are necessary to establish fair competition and protect European industries. The outcome of this landmark case will shape future trade negotiations and could potentially impact the growth of the electric vehicle market in Europe.