Electric Vehicle Taxes: Towards an EU-China Trade War?

Hibapress

The European Union (EU) has moved from threats to action by imposing, starting this Friday, up to 38% additional customs duties on imports of Chinese electric vehicles. A decision that revives fears of a trade war between Brussels and Beijing against a backdrop of accusations of unfair subsidies.

The new customs duties, imposed as a “compensatory measure”, on imports of battery electric vehicles (BEVs) from China, had already been announced on June 12, in addition to the 10% taxes already applied by the EU to vehicles manufactured in China, pending a final decision on their maintenance next November.

The European Commission (EC) wants this delay as a way of leaving the door open for negotiations with Beijing to try to find a solution to this trade dispute. Brussels accuses Beijing of illegally subsidising its manufacturers, which allows them to offer vehicles at unbeatable prices and constitutes “a threat of economic harm to European producers”.

The response from the Chinese authorities was swift. Even before the June 12 decision was announced, a spokesperson for the Chinese Ministry of Foreign Affairs had described the investigation opened by the European executive into Chinese subsidies as a “typical case of protectionism,” saying that the EU “is using it as an excuse to impose tariffs on electric vehicles imported from China.”

“This goes against the principles of market economy and international trade rules and undermines economic and trade cooperation between China and the EU,” stressed spokesman Lin Jian, assuring that in the end, this surcharge “would be harmful to the EU’s own interests.”

On Thursday, the Chinese Chamber of Commerce in the EU denounced the entry into force of this temporary surcharge, saying it “firmly opposes” a “protectionist measure” motivated by “political factors”.

The organisation, however, welcomed, in a statement, the ongoing consultations between Brussels and Beijing, saying it hoped for “a solution as soon as possible” to avoid the EU making these additional customs duties definitive by November for a period of five years.

The European bloc also seems to be counting on these negotiations to defuse the situation and avoid a trade war with the Asian giant. “Consultations with the Chinese government have intensified in recent weeks, following an exchange of views between Executive Vice-President Valdis Dombrovskis and Chinese Minister of Commerce Wang Wentao,” assures the EC.

Contacts are also continuing at the technical level with a view to reaching a solution “compatible with WTO rules, which adequately addresses the concerns raised by the EU”, she insists.

Moreover, the decision to impose these additional customs duties is far from unanimous within the countries of the Union. While France and Spain want proportionate measures against Beijing, Germany, which is very involved in China, has fought alongside Sweden and Hungary to avoid sanctions in this matter, fearing Chinese reprisals.

“The negative effects of this decision outweigh the possible benefits,” lamented the Volkswagen automobile group. This giant is one of the German manufacturers, along with Audi, BMW and Mercedes, which achieves nearly 40% of its global sales in China.

It is worth noting that Beijing announced in January an investigation targeting spirits imported from the EU, following Brussels’ opening of its anti-subsidy investigation into Chinese BEVs. Spirits, dairy products, meat and high-powered cars are also reportedly in the sights of the Chinese authorities, who in turn accuse the EU of illegal subsidies.

It remains to be seen whether the negotiations will prevent the outbreak of a broader trade war, which could impact all global trade, given the weight of these two giants in the global economy and the strategic nature of the electric vehicle industry at a time when the world is beginning its ecological and energy transition.