EU member states agree to impose tariffs on Chinese electric vehicles

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EU member states have agreed to impose tariffs of up to 45 per cent on imports of Chinese electric vehicles, ratcheting up the biggest trade dispute between the economic superpowers in a decade.

In a vote on Friday, a sufficient number of members backed a European Commission proposal to hit imports with anti-subsidy tariffs of up to 35.3 per cent, on top of an existing 10 per cent levy, despite vocal opposition from Germany and Hungary.

The decision follows a year-long investigation into the EV market, during which the commission found subsidies to Chinese carmakers and their suppliers, including loans from the country’s banks.

It also caps months of escalating clashes between Brussels and Beijing over cars and agricultural exports.

The EU tariffs will last for up to five years and range from 7.8 per cent for Tesla to 35.3 per cent for SAIC, which owns the MG brand.

The move comes as Chinese companies have embarked on an aggressive expansion in Europe, where domestic carmakers are struggling to produce electric vehicles cheaply.

Before Friday’s vote, China had already retaliated by threatening tariffs on EU brandy imports and started investigations into pork and dairy products.

“I think we all know we’re going to face retaliation,” said one EU diplomat involved in the vote. “There’s no joint strategy on China. We’re basically just muddling through.”

The vote also exposed tensions within the bloc over trade policy towards China, with Germany and Hungary, two big exporters to that country, pushing for a more muted response.

According to two people briefed on the matter, 10 member states voted for the tariffs, five against and 12 abstained.

Slovakia, Slovenia and Malta joined Germany and Hungary in voting against. France, Italy, Poland, the Netherlands, Bulgaria, Denmark, Ireland and the Baltic states voted in favour.

Spain, whose Prime Minister Pedro Sanchez warned against a trade war on a recent visit to Beijing, abstained, in effect backing the commission proposal.

Since the commission launched its investigation, Beijing has criticised Brussels for what it says is rising protectionism. It has hit France by announcing plans for a levy of 34 per cent on brandy, though it has yet to impose that.

China’s carmakers had offered to restrict sales and raise prices to avoid tariffs, and the commission said on Friday it would “continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidisation established by the commission’s investigation, monitorable and enforceable”.

German carmakers, which rely on China for a large proportion of their sales and profits, have been vocal in their opposition to raising tariffs.

Before the vote, BMW’s chief executive Oliver Zipse warned that a trade conflict between the EU and China would “severely slow down . . . the fight against climate change”.

Tanja Gönner, managing director of the BDI, Germany’s leading business organisation, called on both sides “to continue talks and avert an escalating trade conflict”.

Chinese EV and battery makers have made at least eight major investments to establish manufacturing in the bloc since the start of 2023, according to Climate Energy Finance, a Sydney-based research group.

That includes new facilities in Hungary by BYD and CATL, the world’s biggest EV and battery makers respectively. Several more factories are being built by Chinese companies in nearby Morocco and Turkey.

China’s foreign ministry did not immediately comment.

Additional reporting by Guy Chazan in Berlin and Henry Foy in Brussels