Consumers in Europe will face higher prices for electric vehicles made in China after additional tariffs on the cars came into effect on Wednesday as part of an effort by European Union leaders to create what they call a level playing field for domestic auto companies.
The higher tariffs stem from an investigation the European Union started into subsidies provided by Beijing that helped carmakers in China produce and sell electric vehicles, giving them a competitive edge over their European rivals.
Chinese automakers have called the additional tariffs “protectionist” and “arbitrary,” arguing that their economies of scale have led to the rapid development of electric vehicle production.
The new tariffs, which are in addition to existing import duties of 10 percent, vary based on the amount of subsidies each automaker in China received, starting at 7.8 percent for Tesla and go up to 35.3 percent for China’s SAIC Motor of Shanghai. They are to remain in place for five years.
Lin Jian, spokesman for China’s foreign affairs ministry, said on Wednesday that the European Union’s move would hurt the cooperation between the two sides, as well as Europe’s efforts to address climate change.
“This is a typical act of trade protectionism,” Mr. Lin said, adding that he hoped E.U. leaders would continue to move forward with talks with China to avoid the “escalation” of trade frictions.
How will tariffs protect European carmakers?
Europe’s automakers were slow to develop battery and gasoline-electric hybrid technologies for cars, instead spending decades focusing on trying to make diesel-fired combustion engines more efficient.
Only after Volkswagen was found to be cheating on its emissions in 2015 did the European automakers shift their focus to battery technology in earnest. By that time, Chinese car companies, including those like BYD that began as battery producers, had been working on electric cars for years.
The United States and Canada have both imposed 100 percent tariffs on electric vehicles made in China, but European leaders said their intention was not to cut off all imports of the vehicles, but to slow them enough to give European companies time to catch up.
“Europe doesn’t want to hamper its own electric vehicle green transition by making Chinese cars prohibitively expensive,” said Emre Peker, a London-based director for Europe at the Eurasia Group, a private consulting firm.
The market share of Chinese-made electric vehicles in the European Union has jumped to more than 20 percent from around 3 percent three years ago, according to ACEA, a European auto industry group. A failure to impose tariffs would have resulted in significant job losses in Europe, a senior European official said this week.
A senior European diplomat, who spoke on condition of anonymity per diplomatic practice, said the tariffs were critical for protecting the European auto industry.
How has China responded to the tariffs?
Chinese officials had hoped to avoid the tariffs, which they have called unfair. They have since charged that European producers of brandy, pork and dairy have dumped exports in China at low prices in violation of global trade rules.
Chinese officials criticized the E.U.’s decision to move ahead with higher tariffs. “China does not agree with or accept the ruling,” China’s commerce ministry said in a statement on Wednesday.
China’s auto industry has suggested that its government impose tariffs on large gasoline-powered cars imported from the European Union in retaliation for the tariffs. China has a 40 percent sales tax on cars and sport utility vehicles with very large gasoline engines, almost all of which are made by German automakers and imported from North America or Europe.
What happens next in the growing trade war?
In announcing the tariffs, the European Commission said that talks with China over a solution to the dispute would continue. The two sides have met eight times over the past year. But on Monday, European Union officials said that “significant remaining gaps” still existed, leading them to put the tariffs into effect.
European leaders said they remained open to negotiating with individual car companies to set an agreed base price at which they could sell their cars in Europe. It was not immediately clear which companies would be involved in such talks.
Some Chinese automakers, such as BYD, have responded to the tariffs by setting up factories within the European Union or Turkey, which is within the European free trade zone. Leapmotor, another Chinese automaker, entered into a joint venture with Stellantis — owner of the French brands Peugeot and Citroen, in addition to Jeep and Chrysler in the United States — which will allow the company to produce its electric models in factories in Europe.
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