EU brushes aside risk of China trade war over electric vehicle tariffs – The Guardian

The EU’s top trade official, Valdis Dombrovskis, has brushed aside concerns of trade-war retaliation from Beijing against European business, after the European Commission imposed duties on Chinese electric vehicles.

Dombrovskis, a European Commission vice-president, told Bloomberg Television that talks with China were ongoing, adding: “We are not seeing the basis for retaliation as what we are conducting is indeed in line with WTO [World Trade Organization] rules.”

Provisional tariffs on Chinese EV imports to the bloc ranging from 17.4% to 37.6% will apply from Friday, after the two sides failed to reach an agreement on what the EU executive called “unfair” subsidies from Beijing.

These tariffs – far lower than the 100% tariffs imposed by the US – will come on top of the EU’s existing 10% duty on electric vehicles from China.

Europe’s biggest carmaker, Volkswagen, reiterated its criticism on Thursday of the commission’s proposed tariffs on EVs made in China, arguing that they would not strengthen Europe’s car industry in the long term.

Volkswagen, which is grappling with falling market share in China, has previously warned of retaliation from Beijing. “The timing of the EU Commission’s decision is detrimental to the current weak demand for [battery electric vehicles] in Germany and Europe,” the company said on Thursday.

Stellantis, owner of brands including Citroën, Fiat and Vauxhall, has said it will not take a defensive stance in the battle for electric car sales and preferred to “fight to stay competitive”.

The tariffs are the result of an ongoing EU investigation launched last October, which found Chinese producers benefited from subsidies at every stage of production, from the mining of lithium used in batteries to shipping the vehicles to EU ports, such as Rotterdam and Antwerp.

“Based on the investigation, the commission has concluded that the BEV [battery electric vehicle] value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” it said in a statement to accompany a legal decision published on Thursday.

The European Commission president, Ursula von der Leyen, told Xi Jinping during the Chinese president’s recent visit to Europe that “imbalances” caused by state support for Chinese industry, leading to artificially cheap products, threatened jobs in Europe, which was “a matter of great concern”.

China, which has said it is looking for a “mutually acceptable solution” to the dispute, is investigating French cognac and pork imports over subsidies, raising the prospect of tit-for-tat measures.

“It is plain for all to see who is escalating trade frictions and instigating a ‘trade war’,” the Chinese commerce ministry said last month.

China has won a 25% share of the EU market for electric-battery powered cars, up from 3% in 2020. EU officials fear that without action a European industry that employs 2.5 million people and 10.3 million in the wider supply chain could be seriously hurt, just as the EU saw its solar-panel companies lose out to subsidised Chinese competitors.

From Friday, importers of Chinese vehicles into the EU will be required to give bank guarantees to customs officers to pay the duties. Money will be collected only if the commission concludes in the autumn that the car industry would have been harmed without these duties.

A final decision on definitive duties – which would be in force for five years – will only be taken in the autumn, pending a vote by the EU’s 27 member states.

Under the provisional measures, China’s BYD, which vies with Tesla for the spot of the world’s largest producer of electric vehicles, faces a tariff of 17.4%; Geely will pay 19.9% and SAIC 37.6%.

The rates, calculated according to total subsidies and company turnover, have been modestly adjusted downwards in most cases since the required pre-disclosure of tariffs last month, after technical talks with the companies.

The tariffs enter into force despite staunch opposition from Germany, Europe’s largest exporter to China. The German government has called for an “amicable solution”, but also said “serious movement is needed on the Chinese side”.

German officials do not expect to reverse the measures, which can only be overturned by a weighted majority of 15 EU member states, representing 65% of the union’s population.