EU tariffs on Chinese electric vehicles disrupt global industrial chain
Booth of electric vehicles of the Chinese brand BYD at the International Motor Show IAA Mobility, in Munich, Germany, on September 6, 2023
On 4 July, the European Commission announced its decision to impose a provisional countervailing duty on imports of Chinese electric vehicles (EVs) from 5 July, at a rate ranging from 17.4% to 37.6% for a maximum period of four months. Within this period, a final decision on the definitive duties must be taken by a vote of EU Member States. If adopted, the duties would become definitive for a period of five years. However, the results of the first consultative vote among Member States show that EU governments are deeply divided on the decision to impose these duties. The high abstention rate reflects the scepticism of many EU Member States about the pros and cons of this decision.
The EU’s decision to impose additional tariffs on Chinese EVs could be described as counterproductive, as it harms the interests of many parties, without benefiting anyone.
For Chinese EV companies, this is a major blow. In the European market, these companies have gradually won the favor of consumers thanks to the quality and reasonable price of their products. However, the increase in customs duties, up to 37.6%, has significantly increased the cost of their products in the EU market. As a result, they are at risk of seeing their already small market share shrink. This affects not only established companies like SAIC and BYD, but also new players like Nio and Leapmotor, which are planning to expand their operations in Europe.
For European consumers, the increase in tariffs means a higher cost for purchasing Chinese electric vehicles. This could lead consumers to reduce their demand for electric vehicles, undermining the EU’s efforts to promote electric vehicles and the energy transition.
The question remains whether the tariffs will benefit the European auto industry. The answer is no. Although the EU claims that the measure is aimed at protecting local carmakers, companies such as BMW, Volkswagen and Mercedes-Benz have expressed their disagreement, saying that the move would be detrimental to the European, especially German, auto industry.
Indeed, this move is likely to trigger an escalation of the trade conflict, disrupting the normal market order and hindering the healthy development of the industry. It may also disrupt the mutually beneficial cooperation between China and Europe on new energy vehicles and distort the global automobile industry chain and supply chain. For example, the tariff hike has led to a surge in the price of China-made Tesla Model 3 in Germany and France, while Tesla vehicle prices in Israel have been cut by 10%, which is in sharp contrast to the situation in Europe.
Furthermore, the negative impact of the price increase on the European economy as a whole cannot be ignored. This measure could increase inflation in the future and worsen the difficulties of the European economy, which is already facing multiple problems. Gitta Connemann, President of the Trade Union Association of Small and Medium-Sized Enterprises, criticised the EU for not consulting the Member States and the companies concerned in advance. She stressed that such measures will only affect the economy in the long term and could even worsen inflation.
German economist Ferdinand Dudenhöffer has roundly criticized the EU’s decision to impose additional tariffs on Chinese EVs, saying that it not only fails to protect European car companies but will also have a negative impact on them. He advocates free competition in the market and friendly cooperation between all parties.
The German Automotive Industry Association has called for the temporary tariffs to be dropped and the issue to be resolved through dialogue. Hildegard Müller, the association’s chairwoman, hopes that the EU and China will enter into dialogue and work to minimise the risks. She stressed that economic and trade exchanges with China provide many jobs in Germany, and that much of the funding needed for the transition of German companies also comes from the Chinese market.
The popularity of Chinese EVs in the European market is the result of market competition and consumer choice. The temporary imposition of tariffs runs counter to the principle of fair competition and free trade. The European Commission ignores facts and WTO rules, ignores the calls of governments and industries of several EU member states, and insists on taking trade protectionist measures. This not only harms the legitimate rights and interests of China’s EV industry, but also disrupts and distorts the global automobile industry chain and supply chain, hindering the creation of a fair and just international trade environment.
