Brussels accuses Beijing of flooding its carmakers with enormous amounts of subsidies that lead to artificially low prices and unfair competition.
The European Commission has confirmed what appeared to be a foregone conclusion: stiff tariffs will be imposed on Chinese battery electric vehicles (BEVs) from July 5, a major decision that is expected to redefine relations with Beijing and prompt retaliation against European manufacturers.
The move, which was introduced in early June, is the result of a a nine-month investigation which found that subsidies are being pumped into the entire supply chain of BEVs made in China, by both domestic and foreign companies. Public money was exposed everywhere, officials said, from the mining of raw materials needed to churn out the batteries to the shipping services used to transport the finished products to European shores.
The sheer scale of the subsidies allows Chinese manufacturers to offer their BEVs at significantly lower prices than those assembled on the block, where energy and labor costs are much higher. The price gap triggered a rapid increase in imports of Chinese-made BEVs: from a 3.9% market share in 2020 to 25% at the end of 2023, according to the Commission.
This wave of low-cost imports poses a “threat of economic injury” to EU industry that could lead to devastating losses and put more than 12 million direct and indirect jobs at risk, the executive has warned.
Tariffs are therefore necessary to offset the benefit provided by subsidies.
Thursday’s published decision envisages differentiated duties calculated according to the parent company, annual turnover and the estimated amount of subsidies received. They will be added to the existing 10% rate.
- BYD: 17.4%
- Geely: 19.9%
- SAIC: 37.6%
- Other BEV manufacturers in China that cooperated in the investigation but were not individually sampled, including Tesla and BMW: 20.8%
- Other non-cooperating BEV manufacturers in China: 37.6%
The introduction of measures will be provisional for the time being. Customs will require bank guarantees from Chinese exporters rather than cash, meaning end customers may not immediately notice the change in their pockets.
Member states will hold a first vote in two weeks, but it will be non-binding and serve to test the political waters. The tariffs will remain in place until a final decision is made in four months, which countries could block if they oppose the proposal by a qualified majority. (15 member states representing 65% of the bloc’s population.)
Germany, a global auto exporter with deep ties to the Chinese market, and Hungary, a growing center of Chinese investment, are among those likely to oppose it, although they would not fall short of the numbers required to derail the initiative.
France and Italy, on the other hand, are receptive to levies.
Meanwhile, Brussels and Beijing will discuss possible solutions that could avert the permanent imposition of tariffs. The negotiations will be on a political and technical level.
“We continue to engage intensively with China on a mutually acceptable solution. Any negotiated outcome of our investigation must clearly and fully take into account the EU’s concerns and be consistent with WTO rules,” Valdis Dombrovskis, the Commission’s executive vice-president responsible for trade. , he said in a statement.
However, hopes for a breakthrough are low. Beijing disputed the form and substance of the investigation, calling it a “naked act of protectionism” that “artificially fabricated and exaggerated the so-called subsidies” and vowed to “take all necessary measures to firmly defend the legitimate rights and interests of the Chinese people”. society.”
Last month, China’s Ministry of Commerce launched anti-dumping investigation to imports of EU-originating pork, a move widely seen as a prelude to retaliation. Agriculture and aviation are seen as the sectors most vulnerable to Beijing’s wrath.
A ministry spokesman struck a conciliatory tone on Thursday: “There is still a four-month window for arbitration and we hope that the European and Chinese sides will move in the same direction, show sincerity and continue consultation.” processed as soon as possible.”
The anti-subsidy investigation has been described as one of the most serious in recent times and comes at a low point in EU-China relations over a series of disagreements such as Russia’s invasion of Ukraine, tensions in the Taiwan Strait, repression of the Uyghur minority and disinformation campaigns.
Subsidies provided by the Communist Party have been a perennial source of friction and have been blamed for the decimation of the bloc’s solar industry. Those memories are still raw in Brussels and weighed heavily on Thursday’s decision.
“We have not forgotten how China’s unfair trade practices have affected our solar industry. Many young businesses have been squeezed out by heavily subsidized Chinese competitors,” Ursula von der Leyen said in September when announcing the BEVs investigation.
ADVERTISEMENT“That’s why justice in the global economy is so important – because it affects lives and livelihoods. Whole industries and communities depend on it. So we need to be aware of the risks we face.”