European Union Raises Tariffs on Chinese EVs Over Objections from Beijing

Photo via Reuters

LUKE MADDEN: The EU has officially decided to increase tariffs on Chinese-made electric vehicles to as much as 45.3% after a controversial investigation that split Europe and prompted Chinese retaliation.

Just over a year ago, the European Commission launched an official probe into whether to implement tariffs to protect EU manufacturers from cheaper imported Chinese EVs, which it says has benefitted from state subsidies. The Chinese automobile industry has skyrocketed in the past two decades, with the Commission estimating that the Chinese share in the European EV market has risen from 1% in 2019 to 8% in 2024, and could reach 15% by next year. Due to 100% tariffs on Chinese EVs in the U.S. and Canada, Europe is a natural market for Chinese exports.

However, the Commission has claimed that China engages in unfair trade practices, such as preferential financing and below-market prices for batteries, land, and raw materials, and that China’s spare production capacity of three million EVs per year is twice the size of the EU market. Prices for Chinese EVs are typically 20% lower than their European counterparts. 

The Commission said that the tariffs are necessary to counterbalance these advantages, implementing tariffs ranging from 7.8% for Tesla to 35.3% for China’s SAIC Motor Corp. The duties were calculated based on estimates of how much aid the Chinese government gives each manufacturer according to the EU investigation, with individual tariffs applied for three major Chinese EV brands: SAIC, BYD, and Geely.

China has criticized the investigation, with the Chinese Commerce Ministry claiming that the probe did not have proper evidence and did not conform to the rules of the World Trade Organization. In a post to its official WeChat account, the China Association of Automobile Manufacturers (CAAM) called the probe “an obvious act of protectionism” that would harm the growth of the global EV industry. Beijing has called the new tariffs protectionist and damaging to EU-China relations and automotive supply chains. China recently launched a separate investigation on EU brandy, dairy, and pork in apparent retaliation.

EU member states have been divided on the tariffs, with 10 members voting for them (among them France, Italy, the Netherlands, and Poland), five voting against and 12 abstaining. France’s PFA car association has backed the tariffs, saying that it supports free trade as long as the trade is far. French Economy Minister Antoine Armand said in a statement that, "The European Union is taking a crucial decision to protect and defend our trade interests, at a time when our car industry needs our support more than ever,” calling the higher tariffs “crucial” to the survival of the European automobile industry.

However, several prominent European nations have been outspoken against the tariffs. Germany, the EU’s biggest economy and major automobile producer, opposed the tariffs, with the German economy ministry saying on Tuesday that Berlin supports ongoing EU negotiations with China and hoped for a diplomatic solution to lower trade tensions while protecting EU industry. 

German carmakers have heavily criticized the tariffs and are concerned that retaliatory Chinese tariffs on large-engined gas vehicles would hit them the hardest. Viktor Orban, the Prime Minister of Hungary, has commented that the EU is headed for an “economic cold war” with China. Orban, in a statement to state radio, said, “This is the worst thing that can happen to Europe . . . If this continues, the European economy will die.” Hungary has pursued closer relationships with Russia and China while its Western neighbors have tried to distance themselves from those countries. The Russo-Ukrainian War and fears that inexpensive Chinese imports could hurt Western markets have accelerated these efforts.

While it is too early to see how these tariffs will impact consumer prices, the EU and China have not fully closed the door on diplomatic negotiation. The Commission held eight rounds of negotiations with China to find an alternative to import duties and said that it would continue talks after the tariffs were imposed. "The principals agreed that further technical negotiations would take place shortly," the Commission said after a video call between EU trade chief Valdis Dombrovskis and Chinese Minister of Commerce Wang Wentao. The two sides have looked at possible minimum price commitments from Chinese producers or investors as an alternative to tariffs. It remains to be seen whether or not the tariffs remain a permanent part of the EU’s trade policy, especially against China.

Luke Madden is a staff writer for On the Record. He is a freshman in the School of Foreign Service currently undeclared, but planning to study International Political Economy or International Politics. He is originally from Pasadena, California.