EU imposes tariffs on Chinese electric vehicles, provoking potential backlash from Beijing

After a stalwart investigation into alleged anti subsidy measures by China on electric vehicle (EVs), the European Union has agreed to impose stiff penalties on Chinese made electric vehicles between 30 and 45.3 per cent. The move, which has split Europe, is likely to prompt a hard line response from Beijing.

In addition to the standard 10 percent import duty on cars, the European Commission's new tariffs that will come into force Wednesday range from 7.8 percent for Tesla to 35.3 percent for China's SAIC. But it comes just over a year after the EU launched its investigation into whether the Chinese government had been providing Chinese firms with unfair subsidies, through preferential financing and access to below market prices for raw materials and land.

EU officials say tariffs are required to fight market distortions driven by what they call China's excess production capacity for EVs at 3 million per year, or double the EU market. Now that 100% tariffs have been placed in the United States and Canada, Europe is becoming the number one place for these excess vehicles.

However, China's commerce ministry said in response that the EU ruling was one it did not agree with or accept, expressing strong disapproval. The ministry said that the EU also indicated that it was willing to negotiate with regards to the pricing commitments and hoped that a mutually acceptable solution could be found to avoid seeing the trade tensions escalate.

The China Chamber of Commerce to the EU said the EU actions were 'protectionist' and 'arbitrary,' adding they were disappointed that no meaningful progress was being made in discussions to find replacements for the tariffs.

Beijing has begun investigations into its imports of EU products such as brandy, dairy and pork in retaliation, potentially setting the stage for a tit for tat escalation in trade relations between the bloc's two economic powers. The implications for global trade and the electric vehicle market are still murky as both sides unfold these complex issues.