The European Union will impose tariffs of up to 37.6% from Friday on imports of electric vehicles made in China, EU officials told Reuters, ratcheting up tensions with Beijing in Brussels’ largest trade case yet.
There was, however, a four month window during which the tariffs are provisional and intensive talks were expected to continue between the two sides as Beijing threatens wide ranging retaliation.
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Reuters noted the European Commission’s provisional duties of between 17.4% and 37.6% without backdating were designed to prevent what its president Ursula von der Leyen had said was a threatened flood of cheap EVs built with state subsidies.
The rates, laid out in a 208-page document published on Thursday, were almost the same as those announced by the commission on 12 June. The executive made adjustments after companies identified minor calculation errors in the initial disclosure.
Beijing said then it would take “all necessary measures” to safeguard China’s interests.
These could include retaliatory tariffs on exports to China of products such as cognac or pork.
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By GlobalDataEU trade chief Valdis Dombrovskis reportedly said there was no basis for China to retaliate.
“Our aim is to … ensure fair competition and a level playing field,” he said in an interview with Bloomberg cited by Reuters.
The EU anti-subsidy investigation has nearly four more months to run.
At the end of it, the commission, the EU’s executive arm, could propose definitive duties, typically applying for five years, on which EU members would vote.
“Those talks with China are ongoing and indeed should a mutually beneficial solution emerge, we can also find ways not to apply at the end of the day the tariffs,” Dombrovskis said.
“But it is very clear this solution (would) need to solve that market distortion that we are currently having … and it needs to be market compliant.”
China’s commerce ministry told Reuters on Thursday both sides had so far held several rounds of technical talks over tariffs on the issue.
“We hope that the European and Chinese sides will move in the same direction, [with] sincerity, and push forward with the consultation process as soon as possible,” He Yadong, a ministry spokesperson, said.
BYD faces duties of 17.4%, Geely 19.9% and SAIC 37.6%, the EU said on Thursday.
These are on top of the EU’s standard 10% duty on car imports, Reuters noted.
Companies deemed to have cooperated with the anti-subsidy investigation, including Tesla and BMW, would be subject to 20.8% tariffs and those that did not cooperate a rate of 37.6%.
Chinese EV makers would have to decide whether to absorb the tariffs or raise their prices to cover the billions of dollars in new costs at European borders, Reuters said.
“Chinese automakers are desperate to expand their sales outside of China since the domestic price war is taking its toll,” Tu Le, founder of consultancy Sino Auto Insights, told Reuters.
MG and Nio suggested on Thursday they might raise prices in Europe later this year, Reuters said, noting Tesla said last month said it planned to increase the prices of its Model 3.
The prospect of duties may spur Chinese automakers to invest in factories in Europe, although labour and manufacturing costs are higher than in China, Reuters suggested.
On Thursday, XPeng became the latest EV maker to consider setting up manufacturing in the region to avoid the tariffs.
The Commission had estimated Chinese brands’ share of the EU market had risen to 8% from below 1% in 2019 and could reach 15% in 2025, Reuters said. Prices are typically 20% below those of EU-made models.
