In contrast to the Commission’s position, major European automakers have openly criticized the tariffs. Mercedes-Benz CEO Ola Källenius has said tariffs should be lowered to allow more competition to build better cars, while BMW CEO Oliver Zipse has suggested the tariffs would hurt European competitiveness.
.jpg?itok=Qexy_wA0)
02:03
Chinese electric cars face additional import tariffs of up to 38% from the EU
Chinese electric cars face additional import tariffs of up to 38% from the EU
Their concerns are not unfounded: Importers will bear the additional costs, estimated to cost $1 billion for every 10% increase in tariffs, based on trade data for 2023. This additional financial burden comes at a difficult time for an industry already struggling with declining demand.
Cutting EV imports from China could undermine the EU’s timetable to ban the sale of petrol and diesel cars by 2035, as European production may not be able to meet growing demand for EVs. China, with its more efficient and cost-effective production capabilities, is crucial to the EU’s transition to greener transport.
Notably, Europe has become a major destination for Chinese EV exports: According to the Rhodium Group, EU EV imports from China are expected to surge from $1.6 billion in 2020 to $11.5 billion in 2023, accounting for 37% of the EU’s total EV imports.
Another major concern is the possibility of a tit-for-tat trade war with China: the EU’s China Chamber of Commerce has already suggested it may raise tariffs on EU car imports to 25% from the current 15%.
The impact of a full-blown trade war cannot be overstated, given that China passed legislation in April that strengthens its retaliatory capabilities. In an interconnected global economy, the effects of such a dispute could extend beyond the industries directly involved and affect broader economic stability.
The European Commission’s investigation will continue until late October. Any final tariffs would take effect in November unless a majority of EU member states vote against them, which could allow time for an agreement to be reached between Brussels and Beijing to be reached that would benefit both sides.
A more realistic approach would be to ensure that Beijing does not play into Washington’s hands. This means that threats of retaliation, while legitimate and reputational damaging, should not be allowed by the United States to pit Europe against China. Meanwhile, Brussels would be wise to demonstrate strategic independence and avoid damaging a key source of prosperity. On both sides, cool heads must prevail.
Adriel Casonta is a London-based political risk consultant and lawyer.
