EU should impose tariffs on Chinese electric vehicles | International exchange

The EU is expected to notify China this week that it will impose tariffs on imports of electric vehicles, kicking off a possible summer trade war with Beijing.

A formal pre-disclosure of tariffs could come as soon as Wednesday, after a lengthy investigation into China's state subsidies for car manufacturing is expected to conclude that massive support continues to be focused on the electric vehicle sector.

Chinese manufacturers are already bracing for new import tariffs, but experts predict Beijing will retaliate with countermeasures that could affect a range of EU exports to the country, from cognac to dairy products.

After meeting Chinese President Xi Jingping in Paris last month, European Commission President Ursula von der Leyen warned that the world cannot absorb China's excess production, saying the EU would not hesitate not to protect industries and jobs within the bloc.

The anti-subsidy investigation was launched last October amid suspicions that China was flooding the EU with cheaper electric vehicles due to overcapacity and weakened domestic consumer demand.

It is one of more than a dozen EU investigations into Chinese state aid, including a probe into exports of solar panels, heat pumps and wind turbines, which , according to the energy sector, undercut EU prices by 50%.

Experts suggest Beijing will view imposing tariffs as a test of strength, given that the electric car sector fuels China's export success.

They predict that Xi will not abandon his national bet to dominate the green technology sector worldwide with electric vehicles, solar panels and electric vehicle batteries, instead viewing trade as a battlefield on which he can set the conditions.

If the EU investigation concludes on Wednesday, as expected, that Chinese automakers have gained a competitive advantage, Beijing would receive formal pre-notification of the tariffs and have four weeks to provide evidence to refute the European case.

Any decision to apply customs duties permanently must be supported by member states in November, around 13 months after the investigation was launched.

If imposed, the tariff schedule would have three tiers: individual rates for the sample of companies studied by the EU, which include the world's largest seller of electric vehicles, BYD; an average rate for companies that cooperated with investigations but were not the subject of an in-depth investigation; and a residual right for those who have not been the subject of any investigation.

Consultancy Rhodium Group, which specializes in research on China, said it expects tariffs to be set at between 15 and 30 percent, which will be easy for conglomerates such as BYD to absorb. , which launched its entry-level sedan Dolphin in the EU. last summer the price was just under 30,000 (25,000). As part of its marketing efforts, it is also an official partner of UEFA for the Euro 2024 football championship.

Some China-based producers will still be able to generate comfortable profit margins on the cars they export to Europe because of the substantial benefits they receive, Rhodium said.

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Duties in the range of 40-50%, arguably even higher for vertically integrated manufacturers like BYD, would likely be necessary to make the European market unattractive to Chinese EV exporters.

China has long maintained that it does not subsidize its auto sector and, even if it did, its exports would help Western countries achieve their green goals.

Earlier this week, during a tour of Spain and Portugal, Commerce Minister Wang Wentao insisted that cooperation with the EU was a win-win strategy. I hope the European side will abandon protectionism and return to the right track of dialogue and cooperation, Wang said, calling on Spain not to worry about a possible costly breakup.

He said that the overcapacity that the EU keeps talking about is not an excess of production capacity but an excess of anxiety, and that the so-called market distortion is not a market distortion but a distortion of mentalities.

Western governments say China can easily adjust its strategy, absorb tariffs and compete on a level playing field, but it cannot be allowed to dominate the future clean energy and technology market.

European consumers have already paid a heavy price due to higher energy bills after Russia's invasion of Ukraine exposed the EU's over-reliance on Russian gas, and officials of the EU are determined not to repeat the mistake with China, by pursuing an official risk reduction strategy.