UPDATE: EU-China tensions flare up as Chinese government backlashes against EU tariffs announcement

The EU will impose additional tariffs of 17.4% to 38.1% on electric cars produced in China, the European Commission announced on Wednesday (12 June), prompting strong condemnation from the Chinese government, which threatened to “take all the necessary measures” to defend its companies.

Announcing preliminary results from its anti-subsidy investigation confirmed prices are being distorted by Chinese state support, EU Commission Vice-President Margaritis Schinas said on Wednesday the value chain of Chinese electric cars “benefits from unfair subsidisation, which is causing a threat of economic injury to EU battery electric vehicles producers.”

“When our partners breach the rules, we will assert our rights,” Executive Vice-President Valdis Dombrovskis said in a statement.

“Today we have reached a milestone in our anti-subsidy investigation,” he said, adding that “this is based on clear evidence of our extensive investigation and in full respect of WTO rules.”

Duties will differ per carmaker, with Chinese state-owned manufacturer SAIC facing the highest duty at 38.1%, Chinese Geely to face 20% and BYD 17.4%.

Western brands producing electric cars in China – including Tesla, Dacia and BMW – will face a 21% duty.

Although formally EU tariffs would be imposed as of 4 July 2024, the announcement from the EU executive’s trade unit – headed by Commissioner Valdis Dombrovskis – is preliminary.

“We will now engage with Chinese authorities and all parties with a view to finalising this investigation,” Dombrovskis said.

Sources following the matter expect the move is intended to kick start negotiations with China and possibly change the final rate, if not scrapping it all together, in the final decision, which has to happen by November 2024.

The final rate of the countervailing duties will then be put to a vote by the Council – where only a “qualified” majority of member states, meaning at least 15 countries representing 65% of the total population, would be able to block it.

Chinese reprimand foreshadows thorny negotiations

However, Chinese officials were quick to react to the news, with the Ministry of Commerce posting heavily angered statements on its website at 12:24 CET (18:28 local time).

“China is highly concerned and strongly dissatisfied with the fact that the EU side has ignored China’s repeated strong opposition, and ignored the appeals and dissuasion of the governments and industries of many EU member states.”

“The European Commission is holding high the banner of green development with one hand and wielding the big stick of ‘protectionism’ with the other hand to politicize and weaponize economic and trade issues,” the Ministry said, adding this “is not in line with the spirit of the consensus of Chinese and EU leaders on strengthening cooperation.

“[The move] will affect the atmosphere of bilateral economic and trade cooperation between China and the EU,” Chinese officials then went on to warn – adding that they “will closely follow the EU’s follow-up progress and resolutely take all necessary measures to firmly defend the legitimate rights and interests” of Chinese companies.

They also called on EU counterparts to “correct […] wrong practices” and quickly implement what was recently agreed at the “trilateral meeting between China, France and the EU.”

Finally, they urged the Commission to “properly handle economic and trade frictions through dialogue and consultation.”

Before the decision, the Commission was subject to heavy lobbying, with the Chinese government threatening to retaliate against the EU with measures against the agricultural or aviation sector. European carmakers, too, stepped up warnings against the move as they fear they could become the target of countermeasures taken by the Chinese government.

In 2023, 19.5% of electric vehicles sold in Europe were made in China, according to NGO Transport & Environment, many of which were cars of brands of Western carmakers such as Tesla, Dacia or BMW.

Chinese brands such as BYD and MG, meanwhile, could reach a market share of 11% this year, the organisation estimates.

Additional reporting by Anna Brunetti

[Edited by Anna Brunetti/ Chris Powers]

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