EU, China head towards a ‘trade war’ over import tariff on electric vehicles

EU imposes new tariffs on Chinese EVs, sparking potential trade war, affecting German automakers and climate goals.

The European Commission released this month its new tariff rates for battery-operated electric vehicles imported from China, which is being perceived as the start of a potential trade war between the European Union (EU) and China.

“The Commission has provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” noted the European Commission in its statement on June 12.

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According to a study by the Rhodium Group, EU imports of EVs from China jumped from $1.6 billion in 2020 to $11.5 billion in 2023, accounting for 37% of all EV imports in the bloc. The Commission began its anti-subsidy investigation on imports of Chinese BEVs in October 2023. These new tariffs will go into force from November 2, 2024.

The extra duties range across brands. BYD, China’s largest EV maker and exporter, will incur a 17.4% tariff. Geely, the parent company of Volvo, will have to pay a 20% tariff, and the Chinese state-owned Shanghai Automotive Industry Corporation (SAIC) will have to pay the highest tariff, 38.1%. After further discussions, other EV makers, such as Tesla, will have a separate rate. Even German and other European carmakers who make BEVs in China will be subject to the new tariffs.

The different tariff rates also depend on which companies cooperated with the EU in its investigations (such as BYD, which pays a lower tariff) and the ones that didn’t (such as SAIC, paying the higher rate). These new tariff rates are over and above the 10% duty already charged on vehicles imported from China.

Loyle Campbell, a research fellow at the German Council on Foreign Relations (DGAP), noted that China has had a problematic industrial policy for the last two decades where entire industries were aided by the local, regional, and national subsidies. He pointed out how China took over the solar industry.