Stay informed with free updates
Simply log in to Commercial disputes myFT Digest – delivered straight to your inbox.
Brussels is pushing ahead with Chinese tariffs on electric vehicles that are expected to bring in more than 2 billion euros a year, reversing warnings from the German government that the move risks starting a costly trade war with Beijing.
The European Commission is due to notify carmakers on Wednesday that it will temporarily apply additional tariffs of up to 25 percent to imported Chinese electric vehicles starting next month, according to people familiar with the decision.
Brussels claims that Chinese electric car makers benefit from subsidies that undercut their European competitors.
The tariffs, pushed by France and Spain, will bring billions of euros into the EU budget annually as sales of Chinese electric cars in Europe grow. China, the bloc’s biggest trading partner, exported 10 billion euros worth of electric cars to the EU in 2023, doubling its market share to 8 percent last year, according to analysts Rhodium Group.
Beijing has warned it will retaliate as it tries to persuade most EU capitals to oppose the new tariffs, which would be on top of the bloc’s existing 10 percent tariffs. Beijing already applies a 15 percent tariff on European electric vehicles.
Germany, Sweden and Hungary said they did not approve of the move, fearing Chinese retaliation. EU officials said Berlin had pressured Ursula von der Leyen, who is seeking a second term as commission president, to drop the anti-subsidy investigation.
German Chancellor Olaf Scholz recently warned that “isolation and illegal customs barriers . . . in the end it just makes everything more expensive and everyone gets poorer”.
But the Scholz government’s intense lobbying “didn’t work,” said a person briefed on the process. The commission was expected to raise its tariffs to around 35 percent, the person said, still well below the 100 percent tariff applied by the US.
You see a screenshot of the interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.
The additional tariffs in Europe will hit Chinese manufacturers including BYD and SAIC, as well as companies like Tesla that have factories in China. Tariffs may vary by manufacturer depending on the amount of subsidy the EU claims to have identified.
The Kiel Institute, an economic think tank, found that an additional 20 percent tariff on Chinese electric cars would cut imports by a quarter. It calculated that with 500,000 vehicles imported in 2023, that equates to an estimated 125,000 units worth nearly $4 billion.
“The decline would be largely offset by increased production within the EU and lower export volumes of EVs, which would likely translate into noticeably higher prices for end consumers,” the researchers concluded.
The Commission expects Chinese electric vehicles to maintain a 15 percent share of the EU market next year. Prices are said to be typically 20 percent lower than EU-made models.
When Valdis Dombrovskis, the EU’s trade commissioner, announced the investigation in October, he acknowledged that electric vehicles are key to the green transition. But he added: “The competition has to be fair.”
His department has gathered evidence that Chinese carmakers and their suppliers received subsidized loans, tax breaks and cheap land, officials said.
China’s Foreign Ministry spokesman Lin Jian on Wednesday dismissed the EU’s anti-subsidy investigation as “a typical example of protectionism,” adding that the decision to impose additional tariffs “violated market economy principles and international trade rules.”
“Protectionism has no future,” he said. “Open collaboration is the way to go.”
Many EU carmakers have condemned the plan, fearing that China could respond in kind or even block them from its market. European brands accounted for about 6 percent of EV sales in the country in 2022.
Germany exported 216,299 cars to China in 2023, down 15 percent from the previous year; brands including Mercedes and Volkswagen also operate plants in the country.
Geely, one of the Chinese companies under investigation, owns Sweden’s Volvo. Prime Minister Ulf Kristersson has joined Scholz and Hungarian Prime Minister Viktor Orbán, who has courted Chinese investment in electric cars, in public opposition to EU tariffs.
The three leaders would need to secure at least 11 other governments to overturn the commission’s decision on tariffs. Other Central European countries such as the Czech Republic and Slovakia are expected to join the opposition.
Food and luxury goods exporters such as Italy also fear retaliation against products from the country.
But France, which pushed for the investigation to protect its own industry and force China to invest in manufacturing there, is unlikely to budge. Spain, another major car maker, has also indicated it will support tariffs.
Member states will be asked to vote on the tariffs by November 2. Definitive duties are usually imposed for five years.
More news from Wenjie Ding in Beijing