Daily Management Review

A Trade Conflict Develops As EU Countries Dither Over Chinese EV Tariffs


A Trade Conflict Develops As EU Countries Dither Over Chinese EV Tariffs
EU nations are unsure whether to approve more taxes on electric cars made in China, underscoring Brussels' difficulty in garnering support for its biggest trade case to yet as Beijing threatens extensive reprisal.
According to a government source, Germany, whose automakers made almost a third of their sales in China last year, wants to end the tariffs, while France has been one of the strongest supporters.
But most nations are still debating the advantages and disadvantages of the worsening trade spat, according to a Reuters informal survey of EU states.
In the upcoming weeks, members will be asked to weigh in on the matter in an advisory vote, marking the first formal test of support for the Commission in a historic case.
The EU opened the investigation—the first of its kind—without receiving a complaint from the sector.
On Thursday, the EU is expected to approve interim levies of up to 37.6% on Chinese brands, including BYD, Geely, and SAIC, as well as on Tesla, BMW, and other western automakers' China-made models.
If the Commission recommends multi-year tariffs at the conclusion of its study, EU members will also have a vote in October. A "qualified majority" would prevent them if at least 15 nations, or 65% of the EU's total population, voted against them.
With 40% of the EU's population, France, Italy, and Spain have said they would support tariffs.
"Europe must defend itself if our companies are harmed and do not compete on equal terms," Spain's economy ministry said.
According to a government source, Germany wants the levies to end completely.
Though Belgium has a caretaker administration and the Netherlands only elected a new government last week, official and government sources stated that the Czech Republic, Greece, Ireland, and Poland were still discussing the matter.
Germany has emphasised that talks with Beijing are necessary to find a solution. The country's automakers have stated that tariffs are the incorrect course of action, with more drawbacks than advantages.
Opponents claim that raising the price of EVs for customers will harm the EU's objective of becoming carbon neutral by 2050. Tesla has announced a price increase.
Additional taxes on EU exports of cognac, pork, and luxury automobiles may result from Beijing's reprisal.
According to the Commission, charges are necessary to offset low-cost loans, land and raw material subsidies, and other forms of support. The intention is to create equal opportunities for all players, not to exclude Chinese automakers as the US's proposed 100% tariff is likely to do.
Tariffs may also force automakers to build cars in the EU and provide the EU leverage in talks with Beijing.
Clear majorities in either direction, according to Hosuk Lee-Makiyama, head of the research tank European Centre for International Political Economy, might empower proponents or opponents of tariffs. He also mentioned that the conclusions drawn from the probe will rely on what Beijing gives in the course of discussions.
"If we go to a vote then, it means negotiations have failed," he stated.
According to interviews with six trade experts, the EU's toughening of its position on Beijing may only be the beginning as its green and tech industries lag behind those of their international competitors.
The biggest indication yet that Brussels means business, according to them, is a 712-page revised report on Chinese state meddling and subsidies that was published in April.
The paper, which is by far the largest the Commission has ever worked on, demonstrates that it has learnt its lesson from the decade-old probe into Chinese solar panels, during which it failed to apply tariffs and the EU's own sector crashed.
It includes study into a wider variety of industries, beyond conventional ones like steel, including semiconductors, communications equipment, and renewable energy. It also provides evidence to support its claims that China does not play by the same norms.
Future cases are left open by this.
"This report aims to provide context and demonstrate how and why Europe is altering its policies," Alicia Garcia Herrero, a senior scholar at the economic think tank Bruegel, located in Brussels, stated. "To be frank, it's also a message especially for the German chancellery."