EU prepares to impose tariffs on Chinese electric cars amid trade tensions

"By launching an anti-subsidy investigation into Chinese-made electric vehicles (EVs) in the name of mitigating the risks highly subsidized EVs pose to European automakers, the European Commission has not only deviated from global trade norms but also betrayed the European Union's solemn pledge to promote free and fair trade," wrote Mei Xinyu, a researcher at the Chinese Academy of International Trade and Economic Cooperation affiliated with the Ministry of Commerce, in a Thursday commentary for "China Daily".

According to him, the European Union has been slowly but effectively moving towards protectionism for the past few decades, earning it the nickname "Fortress Europe." "Its economic policy is marked by increasing regulations which hinder innovation, which has led to its declining economic vitality and global influence," he added. He contrasted the EU's approach to that of China, which he believes is "a responsible member of the global trading community."

Xinyu thus referred to the ongoing dispute between the EU and China regarding the imposition of tariffs on subsidised electric cars in the Middle Kingdom. After investigating the subsidies, the European Commission stated that China subsidises the production of electric cars, allowing them to sell cars at artificially low prices. This sparked concerns in the EU that the European automotive industry might become the next sector unable to cope with China's unfair competition. For example, 90% of photovoltaic panels sold in the EU come from China.

The tariffs on "electric cars" that the EU is considering range from 8% to 35%. This is in addition to the existing 10% tariffs on imported cars in the EU. The rate depends on how much a company was subsidised and whether it cooperated with the European Commission during the investigation. It is set to affect Chinese firms and companies outside China that produce in the Middle Kingdom. For instance, American Tesla is expected to be subject to an 8% tariff.

Access to the European market is crucial for China. Europe is the main recipient of Chinese electric cars, with about 40% of their exports from China going there. It is also one of the last large and wealthy markets that remain relatively open. Recently, the US and Canada announced they would introduce 100% tariffs on imports of electric cars from China.

For this reason, Beijing has raised the issue multiple times at the highest levels. After a meeting with Chinese leader Xi Jinping in early September, Spanish Prime Minister Pedro Sanchez announced that he was "reconsidering" Madrid's stance on tariffs and called on the European Commission to "avoid a trade war" between the EU and China.

The German government's spokesperson supported these words, describing them as "a direction we share." The German automotive industry is heavily dependent on the Chinese market—about one-third of car exports from Germany are intended for China.

Last week, Chinese Trade Minister Wang Wentao visited Berlin, Rome, and Brussels, announcing that he would negotiate an agreement with the EU "until the last minute" to convince the community to withdraw the tariffs. However, Beijing's proposal to introduce price commitments on Chinese vehicles sold in the EU was rejected. The European Commission stated that they would not eliminate the harmful effects of subsidies.

The final decision will be made by the member states' vote, which must occur before 10 October. Rejection of the tariffs would require a so-called blocking majority, meaning at least 15 countries representing 65% of the EU's population must vote "against." In addition to Spain and Germany, Slovakia and Hungary have also signalled their opposition.