The European Union took the next step Thursday toward levying new tariffs on Chinese electric cars, telling automakers to get guarantees from banks that they will be able to pay the taxes to be finalized in October.
The move was expected. The bloc had said on June 12 that it would impose additional tariffs of 17 to 38 percent on electric vehicles imported from China. A European Union investigation had found what officials in Brussels describe as unfair subsidies from the Chinese government to electric car makers.
The Chinese government has denied subsidizing the industry. Beijing claims that the low prices for electric cars made in China reflect intense competition and innovation.
The two sides began talks on June 22 to try to resolve the dispute. “We continue to engage intensively with China for a mutually acceptable solution,” said Valdis Dombrovskis, EU Trade Commissioner.
The imposition of provisional duties requires automakers to provide European countries with financial guarantees for eventual payment, although they do not yet have to send money.
The provisional duties vary significantly by car industry based on the European Union’s estimates of the scale of state subsidies to each Chinese manufacturer. The highest tariffs are imposed on manufacturers that disclose little about their subsidies, including a 37.6 percent duty on SAIC Motor. Lower tariffs apply to BYD, at 17.4 percent, and Geely, at 19.9 percent.
Carmakers will have to guarantee they can pay for vehicles arriving in the European Union from Friday, for a period running until October. But the bloc still has to determine in the coming months whether subsidies for Chinese cars have caused significant damage to Europe’s auto market.
Concerns are spreading among governments around the world that China is seeking to export its way out of economic trouble, as the collapse of the housing market has made Chinese households less willing to spend. In May, President Biden quadrupled additional US tariffs on Chinese electric vehicles to 100%.
Turkey imposed additional tariffs of 40 percent last month on gasoline and hybrid gasoline electric cars imported from China. Turkey had already imposed additional tariffs last year on China’s electric cars. On Tuesday, Canada launched a trade investigation that could also lead to tariffs on electric cars from China.
Brazil is gradually increasing tariffs on electric cars imported from any country starting this month, following a surge in imports from China earlier this year.
China has threatened retaliation against the European Union. The Commerce Department told him on June 17 that it had launched an investigation into whether pork from the European Union was being funneled into China at unfairly low prices. The case could lead to tariffs on dozens of products, from pork chops to pickled pig intestines.
In January, the Commerce Department launched a trade case against imports of cognac and other European spirits mainly from France. The French government was an early supporter of tariffs on electric cars from China.
China’s auto industry has suggested the ministry impose tariffs on large gasoline-powered cars imported from the European Union if the bloc imposes tariffs on electric cars. China has a 40 percent sales tax on cars and SUVs with very large gasoline engines, almost all of which are imported from North America or Europe.
China also has a basic duty of 15 percent on imported cars. Europe has a basic duty on cars of 10 percent and the United States has a duty of 2.5 percent. The various tariffs now drawn up or imposed are added to these basic tariffs.
China is returning to the playbook it followed during its last major trade dispute with the European Union in 2013 over China’s shipments of cheap solar panels to Europe. At the time, Beijing convinced Germany to lead a coalition of EU member states that blocked solar panel tariffs.
But it may be harder for China to stop tariffs on electric vehicles. Europe’s solar industry was decimated a decade ago after the Union scrapped its tariffs. Few in Europe want electric car production to suffer a similar fate.
The European Union also has stricter rules for countries to reverse tariffs. China would need to win a majority of member countries in a final vote in October, and those countries would need to represent at least 65 percent of the bloc’s population.
Member states will also hold a preliminary vote in two weeks on whether to support the temporary tariffs. But the vote is not binding on the European Commission, the bloc’s executive body.
Chinese automakers are starting to build factories in Europe to meet demand and avoid tariffs, following a strategy pioneered by Japanese automakers to circumvent trade restrictions in the United States. “It’s just like Toyota did in the 1980s,” said John Zeng, an analyst at GlobalData Automotive.
But China has plenty of auto factories at home, with the capacity to make twice as many cars as are sold in China, which is the world’s largest auto market.
The trade case has caused a split in Europe’s car industry. German carmakers have opposed the tariffs. They are facing a sharp decline in sales in China as Chinese automakers have gained market share at their expense. Thus, German car manufacturers are increasingly exporting from their factories to China, including Europe.
But auto parts makers in Europe tend to favor the tariffs as major automakers such as Volkswagen increasingly assemble cars from parts made by Chinese companies.
