There is a news of escalating trade tensions between China and the European Union (EU) concerning the automotive industry, specifically focusing on tariffs imposed on electric vehicles (EVs) and the potential response from China. Recent developments in this trade dispute and the actions being considered by both sides to address the issues at hand.
The European Union's decision to impose increased import tariffs on Chinese electric vehicles, with rates reaching up to 38.1%, has sparked significant concern and reaction from Chinese car manufacturers. In response, several prominent Chinese carmakers are advocating for retaliatory measures, specifically suggesting that China should increase import tariffs on large combustion-powered vehicles imported from Europe to 25%. This suggestion is aimed at countering the financial impact of the EU's tariffs on Chinese EVs.
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Earlier in the week, a significant closed-door meeting was convened by China’s Ministry of Commerce in Beijing to discuss possible strategies to address this issue. The meeting brought together representatives from major automotive manufacturers, including SAIC, BYD, BMW, Volkswagen, Porsche, Mercedes-Benz, Stellantis, Renault, and other Chinese auto manufacturers. The primary goal of the meeting was to exert pressure on Europe and lobby against the newly imposed EV tariffs. According to Stefan Hartung, the chief executive of Bosch, this announcement may pave the way for negotiations between China and the EU, as the tariffs imposed by Brussels are open to review.
The idea of increasing tariffs on European gas-powered cars is not new. In May, a Chinese auto research center affiliated with the government proposed raising import tariffs on European cars with engines larger than 2.5 liters from 15% to 25%. Data from the China Passenger Car Association supports the relevance of this proposal, revealing that 196,000 vehicles with engines exceeding 2.5 liters were exported from Europe to China last year, marking an 11% increase from the previous year. Although exports of these vehicles decreased by 12% in the first four months of 2024 to 44,000 units, German car manufacturers have still managed to export $1.2 billion worth of applicable cars to China this year.
The European Commission’s announcement of tariffs against Chinese EVs earlier this month has varied impacts depending on the brand. For instance, SAIC faces the highest levy at 38.1%, while BYD is subjected to a 17.4% tariff. Geely, another major Chinese car manufacturer, is dealing with a 20% tariff, and companies not individually investigated by the commission face a 21% tariff.
In light of these developments, there is a desire among leaders in both Europe and China to reach a mutually beneficial agreement in the coming months to de-escalate the growing trade tensions. The hope is that through dialogue and negotiation, both sides can find a resolution that mitigates the impact of these tariffs and fosters a more cooperative trade relationship.