San Francisco Frontiers - EU to hit Chinese electric cars with tariffs of up to 38%

Brussels provoked Beijing's ire by launching the probe last year in a bid to defend European manufacturers following a surge of cheaper Chinese imports.

The Chinese commerce ministry slammed the decision as "naked protectionist behaviour" in an angry statement after the announcement.

There is also dissent within the EU with Germany, a major trade partner to China, saying the tariffs would harm German companies.

The European Commission has proposed a provisional hike of tariffs on Chinese manufacturers: 17.4 percent for market major BYD, 20 percent for Geely and 38.1 percent for SAIC.

The EU said the amount depended on the level of state subsidies received by the firms.

Electric car producers in China that cooperated with the EU will face a tariff of 21 percent, while those that did not cooperate would be subject to a 38.1 percent duty.

The EU said this would be on top of the current import duty of 10 percent.

To halt the extra tariffs being levied, Beijing and Brussels must resolve the subsidies issue.

"The Commission has provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers," it said in a statement.

The tariffs will apply provisionally from July 4 and then definitively from November unless there is a qualified majority of EU states -- 15 countries representing at least 65 percent of the bloc's population -- voting against the move.

A Chinese commerce ministry spokesperson said the EU's decision risked "creating and escalating trade friction".

Foreign ministry spokesman Lin Jian warned: "China will take all necessary measures to firmly safeguard its legitimate rights and interests."

- German concerns -

Europe's automotive sector is the jewel in its industrial crown -- boasting iconic brands such as Mercedes and Ferrari -- but it faces threats including China's head-start in the switch to electric.

EU officials want to put the brakes on what they claimed were unfair practices undercutting Europe's automakers, which face a 2035 deadline to phase out new sales of combustion engine cars.

The EU tariffs, while high, are lower than the 100-percent rate the United States imposed from last month on Chinese electric cars.

Germany, Hungary and Sweden expressed reservations about the commission's investigation and the push to slap higher duties.

"The European Commission's punitive tariffs hit German companies and their top products," German transport minister Volker Wissing wrote on X.

"Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation," Wissing said.

German government spokesman Steffen Hebestreit said it "would be very desirable from our point of view if we can come to an amicable solution".

The German Association of the Automotive Industry warned the tariffs could do more harm good for European manufacturers.

China is an important market for German car makers, while Hungary, which a month ago hosted a visit by Chinese President Xi Jinping, is clearing land for a BYD factory to be built next year. Geely is the parent company of Swedish-based auto manufacturer Volvo.

Electric automaker Tesla is the only company that has asked the EU to provide its own duty rate calculated based on evidence it has submitted.

- Retaliation -

Chinese media ramped up threats that Beijing could target EU exports, including pork and dairy products, in the weeks running before the commission's decision.

China is the third-biggest destination for the EU's agri-food exports after Britain and the United States.

In January, China launched an anti-dumping investigation into brandy imported from EU, in a move seen as targeting France, which pushed for the commission's probe.

A group representing French cognac producers said it was "deeply concerned" about possible retaliation by Beijing.

China is the world's biggest car exporter and Europe is a critical market for it.

EU imports of EVs from China mushroomed from around 57,000 in 2020 to around 437,000 in 2023, the US-based Peterson Institute for International Economics said.

Ahead of the EU's move, Germany's Kiel Institute for the World Economy said a 20-percent tariff would mean 125,000 fewer Chinese electric cars to the EU, worth almost $4 billion.

The Chinese Chamber of Commerce to the EU warned that the tariffs "will pose a serious market barrier" and hit out at what it called a "politically motivated" probe.

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L.Ramos--SFF