The European Union's (EU) strategic game to impose high tariffs on Chinese electric vehicles continues to unfold.
According to a September 20th report from the Ministry of Commerce, Minister Wang Wentao met with the Executive Vice-President of the European Commission and Trade Commissioner Valdis Dombrovskis at the EU headquarters. They engaged in comprehensive, in-depth, and constructive consultations on the EU's case against Chinese electric vehicles regarding countervailing subsidies. Both parties clearly expressed their political will to resolve differences through consultations and unanimously agreed to continue promoting negotiations on a price undertaking agreement, fully committed to reaching a mutually acceptable solution through friendly dialogue and consultations.
At the same time, three EU diplomats revealed to the media that a vote scheduled for September 25th on this agenda has been canceled.
In the view of experts interviewed, China's active negotiation and consultation efforts in the past period have played a certain role. The EU's willingness to continue promoting negotiations on a price undertaking agreement and to postpone the final vote on tariffs have left more room for maneuver in the negotiations.
Recently, an increasing number of EU countries and industry organizations have expressed dissatisfaction with the imposition of tariffs on Chinese electric vehicles. High tariff barriers and potential retaliatory measures may impact the vital interests of these countries and industries.
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It remains to be seen whether EU member states can form a qualified majority to prevent the European Commission from imposing tariffs. As for Chinese car companies expanding into Europe, what impact will the EU's tariff policy have? In the face of potential trade protection headwinds, how should they respond?
The EU's desire to raise taxes is met with continuous internal opposition.In July of this year, nine months after the European Union (EU) initiated an anti-subsidy investigation, the European Commission announced that starting from July 5th, it would officially impose provisional anti-subsidy duties on pure electric vehicles imported from China. Among them, SAIC Group was subject to an additional tax rate of 37.6%, Geely 19.9%, and BYD 17.4%; other car manufacturers that cooperated with the EU investigation had an average additional tax rate of 20.8%, while those who did not cooperate faced an additional tax rate of up to 37.6%.
The maximum period for the application of the provisional tariffs is four months, during which the EU member states will make a final decision through voting. If the vote is passed, the provisional tariffs will be converted into formal tariffs lasting up to five years.
On September 12th, the European Commission stated that the price undertaking solutions submitted by the China Machinery and Electronics Chamber of Commerce and all electric vehicle manufacturers regarding the EU's anti-subsidy case on electric vehicles did not meet the requirements, and the EU intends to reject the relevant price undertaking applications.
The Ministry of Commerce responded by saying that the European Commission's rejection of the relevant plans without a detailed assessment not only undermines the confidence of the Chinese industry to continue cooperating but also does not meet the expectations of EU member states, nor does it align with its public statement of hoping to resolve the case through dialogue.
Bai Ming, a researcher at the Research Institute of International Trade and Economic Cooperation of the Ministry of Commerce, told a reporter from 21st Century Economic Report that the EU advocates for the imposition of anti-subsidy tariffs on China, claiming that the Chinese government provides unreasonable subsidies for car exports. However, in reality, the EU is arbitrarily defining the scope of government subsidies, and according to the standards proposed by the EU, its support for many industries could be included in the subsidy range. Moreover, many European car manufacturers have not mentioned that Chinese subsidies have caused damage to the local industry, and the EU's decision to impose additional tariffs on behalf of the manufacturers is legally untenable.
Within the EU, voices opposing the imposition of high tariffs are also increasing.
In July, when the EU held a consultative vote on imposing anti-subsidy tariffs on Chinese electric vehicles, Cyprus, Hungary, Malta, and Slovakia voted against, clearly expressing their opposition to the imposition of tariffs.
More countries are changing their attitudes. Spanish Prime Minister Sanchez, during his visit to China in early September, called on the EU to reconsider the tariff plan and emphasized that China and Europe "do not need another trade war." German Chancellor Scholz also expressed support for Sanchez through a spokesman, saying "this is our common direction forward." Spain and Germany had previously cast votes in favor and abstained in the consultative vote, respectively.

Last week, during his visit to Europe, Minister of Commerce Wang Wentao met with German Vice Chancellor and Minister for Economic Affairs and Climate Protection, Robert Habeck. Habeck stated that Germany supports free trade, welcomes Chinese car and parts companies to invest in Europe, and does not approve of imposing tariffs on Chinese electric vehicles. The package of solutions proposed by the Chinese industry is an important step forward, laying a good foundation for the next round of EU-China consultations, and looking forward to a constructive response from the European Commission. Germany will urge the European Commission to seek a proper solution with China and make every effort to avoid trade conflicts.
Industry organizations also believe that trade barriers are not the way to protect European industries. In July, the German Automobile Industry Association issued a statement, bluntly stating that the EU's imposition of anti-subsidy tariffs on Chinese electric vehicles would not only have a negative impact on European consumers and businesses but would also hinder the development of the EU's domestic electric vehicle market.According to reports, representatives of the French cognac industry and grape growers held a protest march in the Cognac region on September 17th. Industry leaders such as the president of Hennessy and the CEO of Rémy Martin also participated in the protest, demanding that the European Union postpone the vote on imposing tariffs on Chinese electric vehicles. The French side believes that the French cognac industry is generally concerned about the anti-dumping investigation conducted by China on European Union cognac, which may force French cognac to withdraw from the Chinese market.
Jian Junbo, deputy director of the Center for China-Europe Relations at Fudan University and deputy secretary-general of the Shanghai European Society, analyzed to the 21st Century Economic Report reporter that several EU member states oppose the imposition of tariffs for practical reasons. For Germany, a large number of German companies such as Volkswagen have established joint ventures in China, and the cars produced enter Europe needing to bear huge tariffs, which will have a great impact on European car companies. Moreover, German car companies are also worried that the Chinese side will take retaliatory measures against the import of fuel vehicles and impose punitive tariffs. Spain is mainly worried about trade sanctions from the Chinese side in the fields of pork, alcohol and other agricultural products, impacting local agriculture and employment, triggering farmer protests and dissatisfaction with the ruling party. At the same time, it is also worried about impacting the overall economic and trade relations between the two countries, which is not conducive to attracting Chinese car companies to invest and set up factories locally. Hungary and others, who are friendly to China in their diplomatic stance, also hope to express their opposition to the tax increase to attract investment in Chinese electric vehicles and battery factories.
"In the short term, the imposition of tariffs may reduce the competitive pressure on European car companies, but in the long term, this is not conducive to the innovation and progress of the European automotive industry," said Jian Junbo.
What is the next step for European exports under the counter-current?
In recent months, the United States and Canada have successively announced an increase in tariffs on Chinese electric vehicles to 100%. In contrast, the EU's policy moves are more cautious.
Jian Junbo said that the United States' imposition of a 100% tariff is essentially trying to completely exclude Chinese electric vehicles from the US market. However, many European car companies have invested in new energy and fuel vehicle factories in China, and the relationship between them is relatively close, so the EU has more flexibility on the issue of tariffs. During this period, if China and the EU cannot reach a price commitment agreement through consultations, the European Commission will deliver the final ruling result for a vote before the end of October as planned. If 15 of the 27 EU member states vote against the tax increase, and the population of these member states accounts for more than 65% of the total EU population, a qualified majority can be reached, which may also prevent the passage of the EU's tariff increase case. Recently, Germany and Spain, which hold opposing positions, have a relatively large voting weight. If they can win the opposition votes of several major countries, the possibility of forming an effective majority will increase, but the uncertainty remains high.
In the view of industry insiders, even if the EU makes a decision to impose tariffs, it will not be able to stop the pace of Chinese car companies exporting to Europe to a certain extent.
An employee of a car company told the 21st Century Economic Report reporter that he is engaged in export business in one of the three major car state-owned enterprises. The EU's imposition of tariffs mainly affects the determination of a small number of car buyers. For local consumers who already trust Chinese manufacturing, even if the price difference between Chinese and European brands is very small, they will still buy Chinese cars. Some customers have a high loyalty to European brands and are not very sensitive to prices. The group of people in the middle who are indecisive accounts for a small proportion. They often switch from Chinese brands to local brands only when the price difference narrows to a certain extent. However, it should be noted that Chinese car companies still have a larger price advantage.From a practical standpoint, domestic automakers are still increasing their presence in Europe. On August 30th, BYD announced the acquisition of Hedin Electric Mobility GmbH, a subsidiary of the European dealer group Hedin Mobility Group. This acquisition allows BYD to directly sell vehicles and spare parts to BYD's dealers in Germany, giving the company more say in pricing and automotive supply. On September 12th, during the Frankfurt Motor Show in Germany, Li Chuanhai, Vice President of Geely Auto Group, revealed that the company is looking for factory locations in Europe but has not yet fully committed to establishing a production base locally. Not long ago, Chery Automobile also disclosed plans to launch the Omoda and Jaecoo brands in Europe this year, preparing to invest billions of euros in marketing to gain recognition in the European market.
In 2023, the proportion of the European market in China's pure electric vehicle exports reached 41.27%. The aforementioned automakers have indicated that the European Union is currently a visible large market with promising growth prospects. Moreover, Europe holds a benchmarking significance in the global automotive industry. In many non-EU countries, Euro standards are considered high standards, and many countries' standards are formulated based on Euro standards. If a vehicle can meet Euro standards, it can also meet the regulations of these countries. Therefore, various automakers are trying to capture the European market.
However, in addition to high tariffs, more potential protectionist risks will still pose challenges to enterprises going abroad. Jian Junbo stated that from 2025, the European Union will implement stricter vehicle carbon emission regulations. Even if a car's carbon emissions meet the standards, the EU may still impose a carbon tax on the grounds that the carbon emissions during the vehicle production process exceed the limit. In addition, there may be attempts to exploit workers' rights protection to demand increased tariffs, bans on imports, or to conduct anti-dumping investigations on the grounds of excessively low export prices to Europe, among other things.
Faced with the potential for significantly increased tariff costs and unpredictable trade barriers, what solutions do automakers have?
If the European Union ultimately passes a decision to impose additional tariffs, Chinese automakers can still maintain their original price advantage in the short term by appropriately reducing their profit margins. At the same time, some automakers are already setting up factories in Europe or investing in third-party markets to avoid tariffs. However, overall, automakers still need to accelerate the diversification of their sales markets and investment regions. This is an important measure to reduce economic and trade risks.