European Union countries have decided to impose duties on electric vehicle imports from China, as discussions continue between Brussels and Beijing to reach a resolution before the end-of-October deadline.
Electric vehicles have emerged as a significant point of contention in a broader trade dispute concerning the impact of Chinese government subsidies on European markets, which has resulted in the undercutting of EU industry prices and increased Chinese exports of green technology to the bloc.
The European Commission, responsible for trade for the 27 member countries, expressed its approval for the majority decision to impose the duties, despite opposition from Germany and Hungary. These duties are set to take effect on October 31 unless China finds a resolution to the ongoing standoff.
Beijing must comply with WTO rules
Commission spokesperson Olof Gill indicated that any solution proposed by Beijing must comply with World Trade Organization rules, address the “injurious subsidization” by China, and be both “monitorable and enforceable.”
The Chinese government has opposed the duties, with a spokesperson from the Ministry of Commerce asserting that China stands against what they consider unfair, non-compliant, and unreasonable protectionist practices by the EU.
Tensions between European Union and Chinese government
Despite the tensions, both the EU and the Chinese government have four more weeks to negotiate. Talks have already taken place between Valdis Dombrovskis, the EU commissioner for the economy, and Chinese trade minister Wang Wentao, as well as among technical experts.
The technical teams from China and the EU are scheduled to resume negotiations on October 7.
The proposed duties range from 7.8% for Tesla to a maximum of 35.3% for state-owned SAIC Motor and other companies that are seen as uncooperative in the EU’s anti-subsidy investigation. BYD’s electric vehicles will incur an additional 17% duty, while Geely will face an 18.8% duty. Each of these duties will be added to a base rate of 10% for all EVs imported from China into the EU.
‘Countervailing duties are necessary’: European Union
The commission maintains that the countervailing duties are necessary to balance the effects of state subsidies in China’s EV sector. They argue that these subsidies allow Chinese vehicles to be sold at lower prices than local models in the European market.
The vote signifies a pivotal moment in what could be the most significant trade dispute in EU-China relations, though it is far from over and may potentially lead to a long-anticipated trade war.
Negotiations aimed at finding a resolution will continue, despite not yielding a settlement thus far. Chinese companies have proposed establishing a minimum price for their imports, but the EU has rejected this, insisting that any pricing must account for the impact of the duties.
European Union and China actively seeking alternative solution
The commission noted that both the EU and China are actively seeking an alternative solution that would comply with WTO regulations, adequately address the subsidization issues identified by the commission’s investigation, and be both monitorable and enforceable.
Any potential agreement is expected to focus on EV import pricing, but structuring and enforcing it could prove complex. Compliance with WTO rules would require the deal to be negotiated without government involvement, which is challenging given that some involved companies are state-owned and some negotiators are Chinese officials.
Even if an individual company reaches a pricing arrangement, it may not prevent the tariffs from becoming law. Instead, that company might receive temporary relief from the punitive duties in exchange for a price commitment. Should the commitment be violated, the tariffs would be reinstated, and duties would continue to apply to imports from companies without an agreement.
Only five members vote against the tariffs
In the recent vote among the bloc’s 27 member states, only five—Germany, Hungary, Malta, Slovenia, and Slovakia—voted against the tariffs. There were ten votes in favor and twelve abstentions, which counted as votes in favor since a blocking majority was necessary to reject the duties.
Larger member states, such as France, Italy, the Netherlands, and Poland, supported the measures, while Spain, which had previously changed its stance following lobbying from China, abstained. Ireland, previously abstaining in a preliminary poll in July due to concerns over its dairy sector facing retaliation from China, shifted to a supportive vote on Friday.
The commission now has the authority to finalize the tariffs by October 30, with the duties set to take effect the following day.
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