EU Hits Chinese EVs With 45 Per Cent Tariffs, Beijing Gears Up For Retaliatory Measures

The European Union has decided to raise tariffs on electric vehicles manufactured in China up to 45.3 per cent, marking the conclusion of a major investigation that has led to tensions within Europe and sparked countermeasures from Beijing.

After over a year since it launched an anti-subsidy investigation, the European Commission is preparing to impose additional tariffs on EVs, with rates starting at 7.8 per cent for Tesla and reaching 35.3 per cent for China’s SAIC, which will be added to the EU’s standard 10 per cent car import duty.

The extra tariffs were reportedly formally approved on Tuesday (29 October) and will take effect later this week.

The European Commission, which oversees the EU’s trade policies, stated that the tariffs aim to counter what it says are unfair subsidies including preferential financing and grants as well as land, batteries and raw materials at below market prices.

The Commission noted that China’s excess EV production capacity of three million units annually is double the EU market size, and with 100 per cent tariffs imposed by the US and Canada, Europe stands as the primary market for these vehicles.

Beijing criticised the EU’s tariffs as protectionist, arguing they harm EU-China relations and disrupt automotive supply chains.

In response, China has launched its own probes into EU imports of brandy, dairy, and pork products, likely as retaliatory measures.

Additionally, China has contested the EU's provisional measures at the World Trade Organisation (WTO).

European car manufacturers are contending with a wave of lower-priced Chinese EVs.

The Commission estimates that Chinese brands' share of the EU market has grown from under 1 per cent in 2019 to 8 per cent, potentially reaching 15 per cent by 2025, with prices generally 20 per cent lower than EU-manufactured models.

Over the past five years, the EU has adopted a firmer stance towards Beijing, considering China both a potential partner in some areas, but also as a competitor and a systemic rival.

However, EU countries remain divided on implementing EV tariffs.

Germany, the EU’s largest economy and a major automotive hub, opposed the tariffs during a recent vote, where 10 EU countries supported the measures, five opposed, and 12 abstained.

German automakers have been vocal in their criticism of the EU's tariff decision, fearing that increased Chinese import duties on large-engine petrol vehicles would particularly affect them.

This decision coincides with thousands of German industrial workers, including auto industry employees, staging strikes for wage hikes, with Volkswagen potentially set to shut domestic plants for the first time in its 87-year history.

Hungarian Prime Minister Viktor Orban remarked that the EU could be steering towards an “economic cold war” with China.

Meanwhile, France’s PFA car association expressed support for the tariffs, adding it backed free trade as long as it was fair, Reuters reported.

The European Commission has engaged in eight rounds of technical discussions with China in search of alternatives to tariffs and said talks can continue after tariffs are imposed.

Both parties are exploring potential minimum price agreements for imported cars and agreed on Friday to hold another round of discussions, though the Commission noted “significant remaining gaps.”

Data from the China Passenger Car Association (CPCA) shows that China’s EV exports to the EU dropped 7 per cent in the first nine months of 2024 compared to last year, but saw a sharp increase of over a third in August and September, ahead of the tariffs.

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