EU ready to announce tariff rates for Chinese EVs

In the coming week, the European Unionis anticipated to unveil the tariff rates that it intends to levy on electric vehicles imported from China. This decision comes from the Commission's assertion that Chinese manufacturers receive excessive subsidies from their government, which grants them an unfair advantage. This move is likely to provoke stern reactions and the possibility of retaliatory measures from Beijing.

The development follows closely on the heels of the United States' recent decision to quadruple the duties imposed on Chinese electric vehicles to a staggering 100 per cent. While the European Union's tariff rates are expected to be significantly lower than those imposed by the United States, they will nevertheless apply to imports from prominent Chinese manufacturers such as BYD and Geely, as well as Western automakers like Tesla that export vehicles from China to the European market.

The impetus behind this move is the growing challenge European automakers face from an influx of lower-cost electric vehicles originating from Chinese rivals. The European automotive industry itself is virtually unanimous in its lack of support for the imposition of these tariffs. This sentiment is particularly pronounced among German automakers, whose sales in China constitute a significant portion of their overall revenue, consequently heightening their concerns about potential retribution from Beijing.

European automakers import vehicles manufactured in China for their brands, further complicating the situation.

However, Ursula von der Leyen, the President of the European Commission, has repeatedly emphasized the necessity for Europe to take action to prevent China from inundating the bloc's market with subsidized electric vehicles. As Will Roberts, the head of automotive research at Rho Motion, warned, "If provoked, the reaction and repercussions could lead to a trade war which would be devastating for a region that is still heavily dependent on Chinesedominated supply chains in order to achieve its lofty climate goals."

China has vehemently rebuked the European Union over its anti-subsidy investigation, urging cooperation instead and lobbying individual EU member states. Nevertheless, Beijing has yet to explicitly outline the nature of its potential response should tariffs be imposed.

So far, China has already initiated an anti-dumping investigation into imports of brandy, primarily targeting French-made products. In April, China enacted legislation aimed at strengthening its ability to retaliate should the United States or the European Union impose tariffs on exports from the world's second-largest economy.

The European Union's pre-disclosure notice comes just a few weeks before the July 4 deadline for imposing provisional measures, which could potentially apply retroactively for the preceding 90 days. Interested parties will be granted three working days to comment on the accuracy of the Commission's calculations.

The investigation will continue until late October, at which point a decision will be made regarding the imposition of definitive duties, typically lasting for five years. The proposed duties would take effect unless a significant majority of EU governments oppose them.

This timeline leaves room for the possibility of a potential deal being struck between Brussels and Beijing. Chinese executives are hopeful that such negotiations could soften the impact of the tariffs.

Analysts anticipate that the tariff rates will range between 10 and 25 per cent. For every additional 10 per cent levied on top of the existing 10 per cent tariff, European importers of Chinese electric vehicles could face an added cost of approximately $1 billion, based on 2023 trade data. This would deal another blow to a sector already grappling with slowing demand and declining prices within the domestic market.

The financial impact of these tariffs is expected to escalate further this year as Chinese electric vehicle manufacturers expand their export operations to Europe.