EU tries to challenge China by hiking tariffs on Chinese electric car imports

The European Union has now challenged China once again by moving to hike tariffs on Chinese electric vehicles, escalating a trade dispute over Beijing’s subsidies for the exports that Brussels worries is hurting domestic automakers.

The European Commission, the EU’s executive arm, said it would impose provisional tariffs that would result in Chinese automakers facing additional duties of as much as 38%, up from the current level of 10%.

The commission said it reached out to Chinese authorities to discuss the findings of its investigation into the subsidies and “explore possible ways to resolve the issues.”

“Should discussions with Chinese authorities not lead to an effective solution,” the new rates would take effect on a provisional basis by July 4, the commission said in a press release.

Electric cars are the latest flash point in a broader trade dispute over what Brussels says is China’s unfair state support for green tech exports that also include solar panels, batteries and wind turbines.

Imports of Chinese-made EVs to the European Union have skyrocketed in recent years. They include vehicles from Western brands that have auto plants in China, including Tesla and BMW.

But EU officials complain that Chinese automakers like BYD and SAIC are increasing market share and undercutting European car brands on price thanks to Beijing’s massive subsidies.

The commission said an investigation it opened last year into China’s EV subsidies found that China’s battery electric vehicle value chain “benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers.”

The extra tariffs would vary by company. BYD would face an additional 17.4% charge. Geely, which owns Sweden’s Volvo, would be hit with a further 20%. For SAIC, it would be 38.1% extra.

Chinese Foreign Ministry spokesperson Lin Jian, speaking at a daily briefing, blasted the EU’s investigation as “typical protectionism” and said Beijing would “take all measures necessary to protect our legitimate rights and interests.”

U.S. President Joe Biden slapped major new tariffs on Chinese electric vehicles, advanced batteries, solar cells, steel, aluminium and medical equipment last month. Biden said that Chinese government subsidies ensure the nation’s companies don’t have to turn a profit, giving them an unfair advantage in global trade.