In June 2024, the European Commission delivered the initial conclusions of its investigation into the subsidy practices of the Chinese central and local governments to producers of electric vehicles (EVs). It considered that the nature and level of this support constituted an obstacle to free and undistorted competition on international markets, and provisionally adopted a massive increase in customs tariffs, which could reach 30% to 50% of the price of imported vehicles depending on the manufacturer (compared with 10% today). These protectionist measures apply both to Chinese brands and to foreign (including European) producers and assemblers operating in China as part of joint-ventures. On the other hand, Chinese brands producing outside China would not be subject to these tariffs.
The Commission’s decision follows that taken by US President Joe Biden to massively increase tariffs on a range of Chinese products and components deemed strategic for the energy and digital transitions. Imports of electric vehicles are subject to high tariffs (100%), as are the batteries and metals used in their production (up to 25 %).
The European Commission therefore appears to be aligning itself with the US position of increasing trade retaliation against China, but its motives differ because of a markedly different commercial and industrial context. In the United States, imports of Chinese-brand electric vehicles are currently insignificant. In contrast, the share of Chinese-made electric vehicles in European Union (EU) imports has risen sharply in recent years. Virtually nil in 2019, it reached 20% in 2023, all brands combined, and more than a third of these imports were Chinese brands, a share that is rising sharply. In its projections, the association Transport & Environment estimates that Chinese models could account for 20% of battery-electric vehicle sales by 2027. More exposed to Chinese competition, some European manufacturers are also more dependent on the Chinese market: a third of Germany’s car exports go to China.
Share of the battery-electric vehicles market in EU sales: breakdown by make, and projection to 2027
Source: “How Europe Can Use Tariffs as Part of an Industrial Strategy”, Transport & Environment, 27 March 2024.
The tariffs proposed by the Commission are not the result of a formal procedure initiated at the World Trade Organisation (WTO). The international institution is still paralysed by the American block on the appointment of judges to the Appellate Body, which renders the mechanism for settling trade disputes ineffective. However, the European Commission believes that it is acting in accordance with the principles of multilateralism, as part of a transparent investigation aimed at proving the current or imminent harm caused to its domestic industry by Chinese subsidies.
In response, a spokesman for the Chinese Ministry of Commerce said that his country “reserves the right to lodge a complaint with the WTO and will take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies”. Beijing’s first official response was to launch an antidumping investigation into imports of pork products from the EU.
The increase in customs tariffs proposed by the Commission could become definitive in November 2024, if the Member States of the European Council agree by qualified majority. But a compromise agreement between the EU and China cannot be ruled out until then.
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