It’s now official: electric vehicles manufactured in China will have extra tariffs in the European Union of between 35.3% and 7.8%. The decision, which was left in the hands of the European Commission due to the division of the member states, was published this Tuesday in the Official Gazette of the EU and comes into force this Wednesday after the failure in the negotiations with Beijing. Although community sources point out that “progress” has been made in recent weeks, “important gaps” persist that prevent the community government from turning back.
The introduction of these rates, which are added to the current 10%, has been the major measure adopted by the EU to confront the trade war with Beijing. Ursula von der Leyen announced during the last debate on the state of the EU in September 2023 an investigation into the subsidies that the Chinese Government grants to the automobile industry, whose market does not absorb all manufacturing and is flooding the European one. Brussels’ intention was to avoid a situation like that of solar energy in which China became a power in the community market to the detriment of European companies thanks to its state aid.
Once the investigation concluded that unfair competition was taking place, tariffs began to be applied, but only in the form of bank guarantees. Since then, negotiations with the Chinese government have intensified. There have been high-level meetings – the last a telephone conversation between the executive vice president Valdis Dombrovskis and the Minister of Commerce, Wang Wentao – and, above all, of a technical profile, but the conditions have not been met to reach an agreement that would allow reverse.
From the first moment, China has opposed the withdrawal of subsidies, so the negotiation has focused on a “price commitment” by which exporters agree not to sell below a previously determined quantity. That would eliminate the competitive advantage that vehicles manufactured in the Asian giant have over others. However, the offers that the Chinese Government has made so far are “insufficient”, according to community sources, who nevertheless see some “improvements” in the latest proposals.
“Some progress has been made in these discussions to reach a compromise that meets our legal criteria, but we are not there yet,” say those sources who emphasize that the objective is to “defend the European industry.” “It’s about trying to level the playing field and have fair competition,” they explain.
As “significant gaps” remain, tariffs will begin to apply. During the process, the percentages have been slightly lowered for “technical adjustments” and “error correction” that have been identified as the double taxation of some initial issues. Finally, companies that have not cooperated with the investigation and SAIC will have extra rates of 35.3% and, in general terms, those that cooperated, 20.7%. Below will be Geely (18.8%), BYD (17%) and Tesla (7.8%) who negotiated for their part.
“Importers can request a refund if they consider that their exporting producer is not subsidized or if its subsidy margin is lower than the duties paid by importers. “This request must be duly justified and supported by the respective evidence,” says the European Commission in a statement.
Division in the EU over economic interests in China
Tariffs have stirred up waters within the EU. The European automobile industry has opposed this decision given that numerous manufacturers export from the Asian giant and the decision takes its toll on them, in addition to fearing counter-tariffs. That has led countries like Germany to campaign against the European Commission’s decision.
The important economic interests of many countries in China have also crossed paths. During a visit to that country, Pedro Sánchez changed the position that Spain had maintained and asked to “reconsider” the application of tariffs. The movement bothered Brussels, where they accused him of putting Spain’s interests first in obtaining succulent contracts from that country, such as two car factories. It is also one of the countries most affected by the retaliation announced by Beijing: tariffs on pork (one of Spain’s main export sectors), liquors such as brandy and dairy products. The European Commission has started a fight before the World Trade Organization because it considers China’s accusation of unfair competition in these areas unfounded.
Finally, Spain abstained in the final vote in which the division within the EU was evident: ten countries were in favor of increasing tariffs, five rejected them and the majority (twelve) abstained.
Knocking down the tariffs required a qualified majority in the EU (at least fifteen member states representing 65% of the population would have had to vote against), so the European Commission went ahead. Ursula von der Leyen is also seeking a tough gesture in the face of the trade war at a time when Europe practically needs to reinvent itself to increase its competitiveness.
The tariffs that now come into force do so for a period of five years. However, talks with the Chinese Government continue and it is possible to reach an agreement at any time that would allow the imposition to be reversed. In fact, the European Commission reminds that it can be negotiated with exporters individually.
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