The European Union is making a bold move towards collecting new tariffs on Chinese electric cars, with automakers being instructed to secure guarantees from banks ensuring they can pay the impending taxes, set to be finalized in October.
The EU’s decision comes after an investigation revealed what they deemed unfair subsidies by the Chinese government to electric car manufacturers. While China denies these subsidies and claims their low prices reflect healthy competition and innovation, talks have begun between the two parties to resolve the dispute.
Provisional tariffs, ranging from 17 to 38 percent, have been imposed on Chinese electric vehicle manufacturers. Automakers must now provide financial guarantees to European countries to ensure payment for vehicles entering the EU market. The tariffs vary based on the perceived scale of government subsidies received by each manufacturer.
Amid fears of China’s aggressive export strategy, other countries are also implementing tariffs on Chinese electric cars. President Biden quadrupled US tariffs, Turkey imposed additional tariffs last month, and Canada is exploring similar measures.
China has threatened retaliation against the EU by investigating alleged dumping of EU pork. This is part of a larger trade tension that also includes tariffs on European spirits. The automobile industry is a key battleground, with China hinting at tariffs on large gasoline-powered cars from the EU if electric car tariffs proceed.
To avoid these tariffs, Chinese automakers are considering building factories in Europe, following a similar strategy adopted by Japanese automakers in the past. However, China’s existing overcapacity in car production poses a challenge in this evolving trade landscape.
The rift in Europe’s car industry is evident, with German carmakers opposing the tariffs due to declining sales in China, while auto parts manufacturers favor the imposition to protect their interests. The outcome of this trade conflict remains uncertain as both sides navigate this complex landscape.
