The European Union has imposed significant tariffs on electric vehicles from China after months of discussions between Brussels and Beijing failed to resolve concerns over subsidies. The new tariffs, which range from 7.8% to 35.3%, aim to counter the competitive edge that Chinese EV manufacturers gain from government subsidies across their production and supply chains.
“We welcome competition, but it must be underpinned by fairness,” said European Commission Vice-President Valdis Dombrovskis. The commission’s decision followed an investigation revealing that Chinese EV makers benefit from various state supports, including discounted factory land, tax breaks, and financing from state-controlled banks.
These tariffs, set to remain for five years unless a compromise is reached, add to the existing 10% EU duty on car imports. Beijing has strongly opposed the measures, filing a complaint with the WTO and pledging to defend Chinese companies' interests.
Impact on Chinese and EU Manufacturers
Chinese manufacturers such as BYD and Geely face tariffs of 17% and 18.8%, respectively, while state-owned SAIC faces the highest rate of 35.3%. Western companies producing in China, like Tesla, have also been affected, with a 7.8% duty applied to their imports. Geely, which owns brands like Polestar and Volvo, and SAIC’s MG brand—one of Europe’s top-selling EVs—will be particularly impacted.
The EU’s decision has sparked concerns of a trade war, especially in Germany, where auto manufacturers and political leaders worry about economic fallout. France, however, has supported the move, seeing it as essential for protecting Europe’s car industry.
Potential Retaliatory Actions by China
China has hinted at retaliatory measures, already proposing provisional tariffs on European brandy and investigating EU subsidies for dairy and pork products. The China Chamber of Commerce to the EU expressed disappointment, urging both sides to negotiate on establishing minimum prices as an alternative to tariffs.
The U.S. and Canada have also imposed high tariffs on Chinese EVs, and the EU has recently expanded its focus to Chinese subsidies in solar panels and wind turbines, indicating broader trade tensions in the green technology sector.
Consumer Prices and Market Impact
With EV imports from China to the EU down 7% year-over-year but surging in recent months, the effect of these tariffs on consumer prices remains uncertain. Some manufacturers may absorb part of the added costs, while others may adjust prices to compensate for the increased duty.
Ongoing discussions between Brussels and Beijing offer hope of finding an alternative solution that could defuse the escalating trade dispute.