EU tariffs on Chinese EVs popular with industry, but China’s trade chamber warns against implications

The EU is expected to announce preliminary tariffs on Chinese electric vehicles on Wednesday (12 June), and most European industry representatives look forward to the move—but China’s Chamber of Commerce to the EU warns of possible repercussions.

On Wednesday, the European Commission is expected to present the results of the anti-subsidy probe into Chinese electric cars it started in October last year, alongside preliminary tariffs, known as “countervailing duties”, on EV imports.

According to analysts, the Commission could announce 15-30% tariffs, which would be on top of an existing 10% import duty.

Sources told Euractiv earlier this month that this range—which Chinese carmakers selling to the EU market could still absorb while maintaining attractive profit margins—could act as an “opening bid” for possible negotiations with China. They could also act as a lever for an agreement that could see the final tariffs, expected within the next four months, deviate from the initial announcement, if not pre-empted entirely.

However, the Chinese Chamber of Commerce to the EU, which represents more than a thousand Chinese companies operating across the bloc, warned in a statement to Euractiv that the two blocs should tackle the “EV-related friction […] through dialogue and consultation”.

“Regrettably, certain retaliatory measures appear to be in the pipeline,” it said. “Beyond trade, these tariffs are likely to exacerbate tensions in China-EU relations, which are already fraught,” it added.

The Chamber also resisted the EU’s allegation of Chinese “overcapacity,” arguing that such claims are “rooted in misinterpretation.”

“Given the enormous demand for green transition technologies, the world is actually facing an under capacity in sectors like EVs and solar panels,” it said.

Meanwhile, most European business representatives support the move, as they lament unfair competition from Chinese firms – whose prices are distorted, they argue, by direct and indirect advantages given by the Chinese state to domestic producers.

“The rising asymmetries in EU-China trade relations and the market distortions generated by overcapacity need to be addressed,” a spokesperson for the EU’s main business lobby group, BusinessEurope, told Euractiv.

“We want to avoid further trade tensions, but China needs to acknowledge that the EU must safeguard the competitiveness of its industry,” the spokesperson added.

It’s not protectionism if the other one started it

Representatives from the car industry, including Franco-Dutch automotive group Stellantis’ CEO Carlos Tavares and German car industry association VDA – have voiced caution since the start of the Commission’s investigation, fearing a counter-reaction from China that could hurt their business operations.

VDA also criticised the EU executive for failing to coordinate sufficiently with the German government. Here, politicians, including transport Minister Volker Wissing (FDP/Renew), who Euractiv interviewed in May, are highly critical of the move.

Jürgen Matthes, however, head of international economic policy at German think-tank IW, criticised the country’s leaders for “giving the impression that we are practising protectionism if we were to resort to such countervailing duties”.

“That is wrong and misleading,” he said, arguing that “China is practising protectionism by subsidising a lot and across the board – there is no doubt about that.”

“If we use trade defence instruments, then that is a means legitimised by the WTO; it is completely in line with the rules,” Matthes said.

A survey of businesses across different industries, conducted by IW, showed that 81% of businesses said tariffs against Chinese electric cars were “justified” (57%) or “party justified” (24%), with only 7% saying they are not.

“The German government is focussing too much on the interests of individual industries. But it is the task of politicians to keep an eye on the broad interests of the economy,” Matthes said.

China exporting its growth imbalances

Sander Tordoir, Chief Economist at the Centre for European Reform, shared his view, saying: “We are responding. We are not the aggressor; we are merely levelling the playing field.”

The problem of China’s government subsidies, he said, is exacerbated by low domestic consumption in the country, which makes its companies ever more dependent on exports.

“They are essentially exporting their domestic growth imbalances to the rest of the world,” Tordoir said. He added that negotiations between the EU and China would also make it unlikely to yield any progress.

Tordoir was highly critical of China, which he said has been “utterly unwilling” to address these imbalances while also refusing “to roll back on subsidies” despite repeated pleas by EU leaders.

“The EU has a very legitimate case to say we’re not willing to accept this massive shock coming from their surge in exports, which has nothing to do with free trade,” Tordoir said.

Labour groups urge caution

However, Benjamin Denis, senior policy advisor at industriALL Europe, representing seven million employees in Europe’s manufacturing, energy, and mining sectors, warned that the full extent of the EU’s measures is not yet known and generally urged “prudence” regarding the forthcoming decision.

While tariffs are seen by some as necessary to protect Europe from Chinese “dumping” of EVs, Denis said, any retaliatory measure from Beijing could create “problems [for] workers from European industries”.

Denis also noted that tariffs alone will not be sufficient to reverse Europe’s industrial decline.

“Tariffs might be part of a global answer, but it doesn’t [eliminate the need for] a global industrial strategy,” he told Euractiv.

[Edited by Anna Brunetti/Alice Taylor]

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