EU imposes tariffs on Chinese electric cars, retaliation expected

The European Commission will impose temporary tariffs on Chinese electric vehicles starting Friday due to Beijing's unfair subsidization of this sector. If member countries do not raise objections within four months, the EU may make these tariffs permanent in the fall.

The decision to impose temporary tariffs was published Thursday in the EU Official Journal. The document is over 200 pages long, making it the most extended decision in EU history.

The European Commission decided to impose individual tariffs on three Chinese companies under investigation: BYD (17.4%), Geely (20%), and SAIC (38.1%). Other companies manufacturing electric vehicles in China that cooperated in the investigation will be subject to an average rate of 21%. This also applies to European companies that produce in China and export to the EU. These tariffs are in addition to the current EU tariffs on electric vehicles of 10%.

On June 12, the European Commission announced the imposition of tariffs on Chinese electric vehicles and has since held talks with the Chinese side. However, these talks did not result in an agreement, and Brussels issued its decision on Thursday. Beijing announced retaliation. According to the Chinese Chamber of Commerce at the EU, China is ready with countermeasures. In January, China launched an anti-dumping investigation regarding the import of wine from the EU.

EU tariffs are temporary. The decision to make the tariffs permanent will be up to the member countries and will be made within the next four months. A vote by the capitals may take place in October. The tariffs will not take effect if a qualified majority votes against them (55% of countries, practically 15 out of 27 countries, representing 65% of the EU population). In the coming weeks, a non-binding vote will be conducted among the capitals, which the European Commission may or may not consider. Brussels also announces continuing talks with the Chinese side, including vehicle manufacturers. As a result, the permanent tariff rate may differ from the temporary one.

The European Commission will not collect temporary tariffs in cash. For now, the manufacturers affected by the tariffs must present bank guarantees at the borders for their value. The European Commission will collect some money once the EU implements the tariffs permanently, which could happen at the beginning of November. The tariffs will fund the EU budget. However, if the EU decides to withdraw from imposing tariffs on Chinese electric vehicles, the guarantees will expire.

The tariffs imposed by the European Commission are compensatory. They aim to level the playing field in the market between subsidized Chinese companies and European electric vehicle manufacturers. Therefore—as the European Commission emphasizes—the rates in effect from Friday reflect the amount of public assistance the Chinese government provides to electric vehicle manufacturers. The European Commission stresses that the goal is to protect the European industry and avoid a situation similar to the photovoltaic panel market, which has been dominated by Chinese manufacturers, practically pushing European ones out.

China is the world's largest manufacturer of electric vehicles. The global export of these cars from China increased by 70% last year, reaching a value of CAD 45.6 billion. The EU is China's largest recipient of electric vehicles, accounting for nearly 40% of China's exports.

In 2023, EU countries purchased Chinese cars worth CAD 5 billion—almost 40% more than the previous year.

American car manufacturer Tesla has filed a request for an individual rate, which the European Commission will review before the tariffs become permanent. Currently, Tesla is subject to a 21% rate.