EU Tariffs on Chinese EVs: Crucial Vote Could See Up to 45% Tariffs Imposed

EU Tariffs on Chinese EVs: Will the Vote Bring Up to 45% Duties?

European Union (EU) members are set for a pivotal vote on Friday regarding imposing tariffs of up to 45% on imports of Chinese-made electric vehicles (EVs). This is one of the EU's most high-profile trade cases, and it could trigger retaliation from Beijing.

The European Commission, responsible for the EU's trade policy, has proposed these final duties to counter China's unfair subsidies. This move comes after a year-long anti-subsidy investigation into the matter.

The Voting Process and Tariff Approval

EU tariffs on Chinese EVs can be imposed for five years under EU rules unless a "qualified majority" — 15 countries representing 65% of the EU population — votes against the plan. In this vote, a lack of a qualified majority either way will allow the EU executive to proceed with adopting the tariffs. Alternatively, the Commission could submit a revised proposal to seek broader support.

France, Greece, Italy, and Poland have announced they will vote in favor of the proposed tariffs, as reported by Reuters. This collective support is sufficient to prevent a majority block against the tariffs.

Germany and Automakers Push Back

Germany, the EU’s largest economy and a key player in car manufacturing, is poised to vote against the tariffs, according to sources. German automakers, who rely on China for around a third of their sales, argue that such tariffs are counterproductive. Volkswagen (ETR: VOWG_p), a major German car manufacturer, openly stated that tariffs on Chinese EVs are "the wrong approach."

Alternative Approaches to EU Tariffs on Chinese EVs

Spain, initially a supporter of tariffs, seems to have reconsidered its stance. Spain's Economy Minister has urged the European Commission to maintain open negotiations beyond the binding vote, aiming to reach a mutual agreement on EV prices and possibly the relocation of battery production to the EU. This sentiment was echoed by Spanish Prime Minister Pedro Sanchez during a visit to China, suggesting a potential shift in the EU’s stance on tariffs.

Concerns Over Beijing's Potential Response

The possibility of imposing EU tariffs on Chinese EVs has caused apprehension among some EU members. China's response has already included launching investigations into imports of European products like brandy, dairy, and pork. Over the last five years, the EU's approach to Beijing has become more assertive, with China being viewed as a potential partner, but also as a competitor and systemic rival.

Impact of China's EV Production Capacity

The European Commission has highlighted China's excess EV production capacity, which stands at around 3 million units annually — a volume double the size of the EU market. With tariffs as high as 100% in markets like the United States and Canada, Europe has become an attractive market for Chinese EV exports.

Ongoing Negotiations and Tariff Ranges

The EU has indicated a willingness to continue discussions with China to find alternatives to tariffs. One proposed solution is establishing a minimum import price based on criteria such as range, battery performance, and vehicle type. The current range of tariffs varies, from 7.8% for Tesla (NASDAQ: TSLA) to 35.3% for companies like SAIC that did not cooperate with the EU investigation. These tariffs would be in addition to the EU's standard 10% import duty for cars.