EU hits China with tariffs in trade war

A heavy tax will be imposed on the sale of electric vehicles from China to the EU after many member states backed the plans.

The move to introduce tariffs aims to protect the European car industry from being undermined by what EU politicians believe is unfair Chinese subsidies for its cars.

Tariffs of up to 45% will be levied on electric vehicles made in China over the next five years, but there have been concerns that the move could raise electric vehicle (EV) prices for consumers.

The decision, which has divided EU member states such as France and Germany, risks igniting a trade war between Brussels and Beijing, which has criticized tariffs as protectionism.

China has been relying on high-tech products to help revive its struggling economy and the EU is a major overseas market for the country’s electric car industry.

The local car industry has grown rapidly in the last twenty years and its products such as BYD have started to enter international markets, which has sparked the threat of companies such as the EU that their companies will not be able to compete with cheap prices.

The EU imposed import tariffs of varying levels on various Chinese manufacturers over the summer, but Friday’s vote was to decide whether they are implemented over the next five years.

The costs were calculated based on estimates of how much Chinese aid each manufacturer received following the EU investigation. The European Commission imposed individual duties on China’s three largest EV companies – SAIC, BYD and Geely.

EU members are divided by costs. Germany, whose auto manufacturing industry is heavily dependent on exports to China, was against them. Many EU members refused.

The German car manufacturers were very controversial. Volkswagen says the prices are “not the wrong way around”.

However, France, Greece, Italy and Poland were understood to be in favor of import tariffs. The tax proposal would only be blocked if a qualified majority of 15 members voted against it.

On Friday, SAIC – which owns MG – said it would not change the prices of its electric cars this year, regardless of the vote.

Germany’s top industry association, the BDI, has called on the European Union and China to continue trade talks on tariffs to avoid an “escalating trade dispute”.

The European Commission, which held the vote, said the EU and China would “work hard to explore an alternative solution” to import tariffs to deal with what it called “damaging subsidies” for Chinese electric vehicles.

Statistics show that in August this year, EU registrations of battery-powered vehicles fell by 43.9% from last year.

In the UK, demand for new electric cars reached a new record, but orders were largely driven by commercial deals and deep discounts from manufacturers, according to the industry trade association.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), said companies are “deeply concerned that the market is not growing fast enough to meet the targets”.

The industry has warned that drivers need better incentives to buy electricity that will help manufacturers ahead of the government’s plan to ban the sale of new petrol and diesel cars by 2030.

Automakers are required to meet regulations for the sale of electric vehicles. Under the Zero Emission Vehicle (ZEV) law, at least 22% of vehicles sold this year must be zero emission, with the goal of reaching 80% by 2030 and 100% by 2035.

Manufacturers who fail to meet quotas can be fined £15,000 per vehicle.

The industry, including executives from BMW, Ford and Nissan, wrote to Chancellor Rachel Reeves on Friday saying the industry “could miss those targets”.

It said economic factors such as high energy and material costs and interest rates meant electric cars remained “stubbornly expensive and consumers wary of investing”. The average cost of buying an electric car in the UK around £48,000.

They said the “lack of confidence” in the UK’s charging infrastructure was another barrier to encouraging people to switch to electricity.