An investigation by the European Commission previously found China engaged in predatory trade practices.
The European Union (EU) on Wednesday officially began imposing tariffs on electric vehicles from China after the failure of trade talks between EU and Chinese officials.
According to an investigation by the European Commission released in July, EVs made in China benefit “from unfair subsidisation, which is causing a threat of economic injury” to EV manufacturers in the EU. The Commission recommended a range of preliminary tariffs on Chinese EV imports from several entities, but the EU said at the time that it favored resolving the trade dispute via diplomatic talks.
Looks like those talks failed. On Monday, the Commission announced it would officially move ahead with imposing the duties for a period of five years — although it pledged to keep talks going:
As previously disclosed, the investigation found that the [electric battery vehicle] value chain in China benefits from unfair subsidization which is causing threat of economic injury to EU producers of BEVs. As a result, the duties will enter into force on the day following publication in the Official Journal.
In parallel, the EU and China continue to work towards finding alternative, WTO-compatible solutions that would be effective in addressing the problems identified by the investigation. The Commission also remains open to negotiating price undertakings with individual exporters, as is permitted under EU and WTO rules.
As we highlighted in our “On a Collision Course” released earlier this year, passenger vehicles made in China pose a massive threat to the global auto market. Benefiting from massive government subsidization and other unfair trade tactics, Chinese vehicles are priced at far below fair market value. As we warned, if these vehicles are allowed to penetrate the U.S. market, it may very well lead to an “extinction-level event” for the U.S. auto industry.
With some notable exceptions, Chinese auto companies have thus far not been able to sell their passenger vehicles in the United States because of strong trade duties imposed on Chinese auto imports. The Biden administration, in fact, just finalized big tariff hikes on several types of Chinese imports, including a 100% increase on Chinese-made EVs, part of a strategic effort to stop China from dominating the U.S. auto market.
Canada also has imposed a 100% tariff on Chinese EV imports. Other countries, however, have been slower to act. As a result, Chinese automobiles are beginning to overwhelm these markets, and Europe is among them, leading to the action announced by Brussels this week.
Chinese entities subject to countervailing trade duties include BYD, which faces a 17% tariff; Geely, which will be subject to an 18.8% tariff, and SAIC, which was given a 35.3% tariff. Tesla will be assigned a duty of 7.8%, while other Chinese companies that cooperated with the EU’s investigation will be subject to a 20.7% duty. Non-cooperating companies will face a 35.3% duty.