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By Micah McCartney
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Beijing has denounced a widely anticipated European Union decision to increase tariffs on Chinese electric vehicles to as much as 48 percent, calling it a "naked protectionist act" that will disrupt the international automotive industry.
Eight months into its ongoing investigation, the European Commission, which functions as the executive branch of the 27-nation European Union, determined Wednesday in a preliminary ruling that China's subsidies give its battery electric vehicle value chain an unfair advantage.
In May, President Joe Biden increased tariffs on $18 billion worth of Chinese products. Duties on EVs increased from 25 percent to 100 percent, though China's share in the U.S. EV market is negligible.
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On June 12, a spokesperson for China's Ministry of Commerce told reporters, "The findings disclosed in the EU ruling lack factual and legal basis." The spokesperson said the EU was exaggerating the threat of Chinese state subsidies, acting against the interests of European consumers and undermining cooperation on climate change.
"The European Commission is holding high the banner of green development with one hand and wielding the big stick of 'protectionism' with the other to politicize and weaponize economic and trade issues," the spokesperson added.
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The new duties are scheduled to take effect in early July absent an agreement between Brussels and Beijing.
On top of the 10 percent duties on all foreign-made vehicles, the commission is set to add duties to the three major Chinese automakers: 17.4 percent for Tesla rival BYD Auto; 20 percent for Geely, which owns Volvo; and 17.4 percent for SAIC Motor.
Other EV manufacturers that cooperated with the investigation are expected to receive additional tariffs of 21 percent, while those deemed uncooperative are set to face tariffs of 38.1 percent. In a news release, the commission said it had contacted Beijing to discuss its findings and "explore possible ways to resolve the issues identified in a WTO (World Trade Organization)-compatible manner."
The World Trade Organization told Newsweek it had no comment on the matter at this time.
"When our partners breach the rules, we will assert our rights," Valdis Dombrovskis, the commission's executive vice president, wrote in a statement.
On June 6, Xinhua, a Chinese state-run news outlet, spoke with Violeta Bulc, a former EU commissioner for transport, who said she opposed raising duties. "We don't need more walls, but new models of collaboration," she said.
Chinese EV exports have soared in recent years, rising from 4.2 percent in 2018 to 35 percent of the global total in 2023. Almost one-fifth of EVs purchased in Europe last year were manufactured in China, the European Federation for Transport and Environment reported, with that figure expected to rise to one-quarter this year.
Gregor Sebastian, an analyst with the Rhodium Group, a think tank in New York, called the new tariffs "notably high."
"Historically, countervailing duties have been in the high single or low double digits," he wrote on X, formerly Twitter, adding that the new duties give the EU greater leverage in its negotiations with China.
The spokesperson for China's Ministry of Commerce signaled Wednesday that Europe's move could further intensify trade tensions. Beijing will "resolutely take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies," the spokesperson said.
China has already launched anti-dumping inquiries, including on European brandies and industrial plastics from the EU, U.S., Japan, and Taiwan.
Sebastian wrote on X that the almost 40 percent duty increase on SAIC would "significantly impact profit margins," which could prompt the firm to build a plant in Europe or one of China's free trade partners.
Update 6/13/24, 10:50 p.m. ET: This article has been updated with a response from the World Trade Organization.
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