EU Considers Tariff Hike on Chinese Electric Vehicles Amid Subsidy Dispute

The European Commission has issued a stark warning to China: resolve the ongoing subsidy dispute over electric vehicles (EVs) or face significant tariff hikes. This ultimatum follows a preliminary finding in an anti-subsidy investigation into Chinese EV imports, which revealed that Chinese battery electric vehicle (BEV) manufacturers receive unfair subsidies, posing an economic threat to EU-based producers.

In a detailed statement, the Commission outlined its intention to engage with Chinese authorities to negotiate a resolution. Should these discussions fail, the EU is prepared to implement countervailing duties starting July 4. Specific tariffs have already been proposed for several Chinese automotive companies involved in the investigation, with BYD, Geely, and SAIC facing potential duties of 17.4%, 20%, and 38.1%, respectively. For other cooperating manufacturers, a weighted average duty of 21% has been calculated, while non-cooperating producers could see a uniform duty of 38.1%.

The situation remains fluid for Tesla vehicles imported from China, as the EU Commission has yet to finalize a specific tariff rate. Additionally, brands not included in the initial sample of the investigation retain the option to request a review from the Commission.

The anti-subsidy investigation, which commenced in October 2023, was spurred by a pivotal speech from Ursula von der Leyen, President of the European Commission. In her address, she condemned the "artificially low prices" of Chinese EVs, arguing that such practices distort the market. "We do not accept this behavior within our own market and will not tolerate it from external sources," von der Leyen asserted.

China has swiftly responded to the EU's actions, urging Brussels to reconsider its stance. A spokesperson from China's Ministry of Foreign Affairs called on the EU to "listen to objective and rational voices from all quarters, immediately correct its wrongful practices, cease politicizing economic and trade issues, and properly manage economic and trade frictions through dialogue and consultation," according to Reuters.

The Commission's investigation is ongoing, with a final report expected 13 months after the procedure's initiation. In its provisional findings, the Commission reiterated that the Chinese BEV value chain benefits from unfair subsidies, necessitating potential tariff increases if no diplomatic solution is reached. For some brands, these countervailing duties could be as high as 38.1%.

As the deadline approaches, all eyes are on the negotiations between the EU and China, which will determine the future landscape of the EV market in Europe.