Higher EU import tariffs on Chinese EVs effective from Thursday (update)

The European Commission has made the higher import tariffs on Chinese EVs effective ‘by law’ from Thursday after the official publication of it. Negotiations with Chinese government failed so far, but the Commission is aiming for deals with individual manufacturers now on a minimum price for cars and quotas for their imports. In return, the Chinese carmakers can count on European concessions.

Until now, such individual deals have been rejected because they are insufficient. However, both sides desire to quickly develop alternatives to the high penalty rates.

Reacting to the seriously increased EU import tariffs on Chinese EVs, the People’s Republic has installed so-called anti-dumping measures against brandy originating from the EU. Furthermore, China will investigate the import of European cars with powerful engines.

Brandy importers in China must pay a guarantee of 39% of the total imported value. This guarantee will probably be used to pay future augmented import taxes on spirituals.

This new measure has big consequences for French cognac, representing almost 95% of all European brandy exported to China. For French cognac producers, the Chinese market represents 25% of their turnover.

Protectionism

China accuses the European Union, and especially the French, of protectionism. President Macron and his Economy Minister Bruno Le Maire were ardent defenders of higher import tariffs on Chinese EVs to protect the European car industry.

Earlier this year, China opened investigations regarding the import of milk products and porc meat. Since yesterday, another investigation has been started regarding possible heightened import tariffs on European vehicles with powerful engines.

The European Commission plans to challenge these Chinese measures before the World Trade Organization (WTO): “The misuse of trade protective instruments is a clear infringement of the WTO trade regulations,” the EU Commission said.

Nevertheless, the EU and China are stressing that negotiations on the higher EU import tariffs for Chinese EVs are still ongoing and that the will to reach a mutual agreement remains.

Disagreement

Inside the EU, there’s a lot of disagreement on the recent heightening of import tariffs for EVs from China. The vote of the member states showed fervent defenders of the measures but also determined adversaries and many members who didn’t know what to choose.

The most determined country to have higher import tariffs is France, initially pushed by its two most prominent car manufacturing groups, Stellantis and Renault. But both have been changing course lately and think a right-out trade war with China is not in their interest.

Nevertheless, the Chinese reaction to approving the new tariffs was predictable. Now, we must see how far each side wants to go in this confrontation. Ultimately, it will once again be the consumer who pays the price. And more and more European car manufacturers aren’t so sure anymore that a war on taxes and import tariffs is the right thing to do to make the industry more competitive.

Especially the German manufacturers, already in turbulent waters because of slow (EV) sales and dwindling profits, aren’t so sure that starting a trade dispute with China, one of their biggest markets, will help them to restore their businesses.