The European Union has officially finalized its increased customs duties on electric vehicles imported from China, escalating a trade dispute over government subsidies and Beijing’s burgeoning green technology exports, The Associated Press reports.
The duties, which took effect provisionally in July, were finalized after negotiations between the EU and China failed to reach a resolution.
Why the Tariffs?
The EU Commission, citing a months-long investigation, concluded that Chinese EV manufacturers receive substantial government support, enabling them to undercut European rivals in price and threaten European jobs. These subsidies range from cheap factory land to below-market lithium and battery supplies, tax breaks, and favorable financing.
The EU argues that this unfair advantage has allowed Chinese EVs to capture a significant market share, rising from 3.9% in 2020 to 25% by September 2023. This rapid growth has sparked concerns that European companies will struggle to compete in the green technology sector, crucial for achieving climate change goals.
Impact on European Drivers and Carmakers
The tariffs, ranging from 7.8% for Tesla to 35.3% for state-owned SAIC, are intended to level the playing field by reflecting the alleged size of China’s unfair subsidies. However, the impact on car prices remains unclear. Chinese carmakers could absorb the duties by reducing profits rather than raising prices.
While consumers might initially benefit from cheaper Chinese EVs, the EU commission warns that allowing unfair practices could eventually lead to less competition and higher prices in the long term.
China’s Reaction
Beijing has condemned the tariffs as protectionist and unfair, accusing the EU of engaging in discriminatory trade practices. China has retaliated with its own anti-dumping investigations into European exports of brandy, pork, and dairy products, imposing provisional tariffs on French and other European brandies.
Looking Ahead
Despite the finalized tariffs, negotiations between the EU and China are expected to continue. A potential resolution involves “price commitments,” where carmakers agree to a minimum selling price for their EVs in Europe.
Some Chinese automakers are also exploring manufacturing in Europe to avoid tariffs and access the market more directly. BYD is building a plant in Hungary, while Chery has a joint venture in Spain’s Catalonia region.
