The European Union has voted to impose tariffs of up to 45% on electric vehicles (EVs) imported from China, raising the stakes in the ongoing trade tensions between the two economic powerhouses, Bloomberg reports.
The move, approved by a narrow margin, comes after an EU investigation concluded that China was unfairly subsidizing its EV industry.
The decision, which will take effect in five years, was met with mixed reactions within the EU. Ten member states voted in favor of the tariffs, while Germany and four others voted against, and 12, including Spain, abstained. The large number of abstentions reflects the deep divisions within the EU about the potential for a trade war with China.
The tariffs are expected to hit Chinese EV manufacturers hard, forcing them to either absorb the cost or raise prices for consumers in Europe. Some Chinese automakers are already considering investing in European factories to avoid the tariffs altogether. The move has already slowed Chinese carmakers’ momentum in Europe, with sales plummeting by 48% in August.
China has strongly denied the EU’s allegations of unfair subsidies and has threatened retaliatory tariffs on European dairy, brandy, pork, and automobiles. The move comes amid broader concerns within the EU about its growing economic dependence on China. Former European Central Bank President Mario Draghi recently warned that China’s “state-sponsored competition” poses a significant threat to the EU’s economic security.
Despite the tensions, the EU and China are still exploring ways to reach a negotiated settlement. Both sides are discussing the possibility of an agreement that would control the prices and volumes of EV exports in place of the tariffs. However, with the clock ticking on the implementation of the new tariffs, the pressure is mounting on both sides to find a solution.
