The European Union on Thursday took the next step toward imposing new tariffs on Chinese electric cars, asking carmakers to obtain guarantees from banks that they will be able to pay the levies that will become final in October.
The move was expected. The bloc had said on June 12 that it would impose additional tariffs of between 17 and 38 percent on electric vehicles imported from China. An EU investigation had uncovered what officials in Brussels describe as unfair subsidies by the Chinese government to electric carmakers.
The Chinese government has denied subsidising the industry. Beijing says the low prices of Chinese-made electric cars reflect strong competition and innovation.
The two sides began talks on June 22 to try to resolve the dispute. “We continue to work intensively with China to find a mutually acceptable solution,” said Valdis Dombrovskis, EU Trade Commissioner.
The imposition of provisional tariffs requires carmakers to provide European countries with financial guarantees for eventual payment, although they do not yet need to send money.
The provisional tariffs vary widely by automaker, based on EU estimates of the scale of each Chinese automaker’s government subsidies. The highest tariffs are imposed on manufacturers that disclosed little about their subsidies, including a 37.6 percent tariff on SAIC Motor. Lower tariffs apply to BYD, at 17.4 percent, and Geely, at 19.9 percent.
Carmakers will have to guarantee that they will be able to pay for vehicles arriving in the European Union from Friday, for a period that will run until October. However, the bloc must still determine in the coming months whether subsidies for Chinese cars have caused significant damage to the European car market.
There is growing concern among governments around the world that China is trying to export its way out of its economic difficulties, as the slumping property market has made Chinese households less willing to spend. In May, President Biden quadrupled additional US tariffs on Chinese electric vehicles, to 100 percent.
Last month, Turkey imposed additional tariffs of 40 percent on gasoline and gasoline-electric hybrid cars imported from China. Turkey had already imposed additional tariffs last year on Chinese electric cars. On Tuesday, Canada launched a trade investigation that could also lead to tariffs on Chinese electric cars.
Brazil is gradually raising tariffs on electric cars imported from any country starting this month, following a surge in imports from China earlier this year.
China has threatened to retaliate against the European Union. China’s Ministry of Commerce announced on June 17 that it had launched an investigation into whether pork from the European Union was being sold in China at unfairly low prices. The case could lead to tariffs on dozens of products, from pork chops to pickled pig intestines.
In January, the Ministry of Commerce launched a trade process against imports of cognac and other European wine-based spirits originating mainly from France. The French government has been one of the first to support tariffs on electric cars from China.
China’s auto industry has suggested the ministry impose tariffs on large gasoline-powered cars imported from the European Union if the bloc imposes duties on electric cars. China levies a 40% tax on sales of cars and sport utility vehicles with large gasoline engines, almost all of them imported from North America or Europe.
China also has a 15 percent base tariff on imported cars. Europe has a 10 percent base tariff on cars and the United States has a 2.5 percent tariff. The various tariffs being drafted or imposed are in addition to these base tariffs.
China is returning to the strategy it followed during its last major trade dispute with the European Union, in 2013, over shipments of cheap Chinese solar panels to Europe. Back then, Beijing persuaded Germany to lead a coalition of EU member countries to block tariffs on solar panels.
But China may find it harder to curb tariffs on electric vehicles. Europe’s solar industry was decimated a decade ago after the European Union rescinded its tariffs. Few in Europe want a similar fate for electric car production.
The European Union has also tightened its rules for countries to revoke tariffs. China would have to win over a majority of member countries in a final vote in October, and those countries would have to represent at least 65 percent of the bloc’s population.
Member countries will also hold a preliminary vote in two weeks on whether they support the interim tariffs. But the vote is not binding on the European Commission, the bloc’s executive body.
Chinese automakers are starting to build factories in Europe to meet demand and avoid tariffs, following a strategy pioneered by Japanese automakers to circumvent trade restrictions in the United States. “It’s like what Toyota did in the 1980s,” said John Zeng, an analyst at GlobalData Automotive.
But China has a glut of car factories at home, with the capacity to build twice as many cars as are sold in China, the world’s largest car market.
The trade case has caused a split in the European car industry. German carmakers have opposed the tariffs and are facing a sharp drop in sales in China as Chinese carmakers have gained market share at their expense. German carmakers are therefore increasingly exporting from their factories in China, including to Europe.
But auto parts makers in Europe have tended to favor the imposition of tariffs as major automakers such as Volkswagen increasingly assemble cars with parts made by Chinese companies.
