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EU-China Relations Strained Over EV Tariffs 

by Rahil M
0 comment

The EU’s plan to impose tariffs on the electric vehicles made by China have started discussions and aim towards seeking a common ground.

China’s electric vehicle industry and the EU are moving towards a war trade which will potentially impact a major sector of Asia’s largest economy. They are on a crashing path and closer to a decisive conclusion. 

The EU’s plan to impose tariffs on the electric vehicles made by China have started discussions and aim towards seeking a common ground. The solution should benefit all parties as it could undermine relations between the two regions. 

The discussions on the EU-China trade were agreed upon by the EU Commissioner Valdis Dombrovskis and the Chinese Commerce Minister Wang Wentao.

The EU imports $11.5 billion worth EVs made in China in the year 2023. This is way higher than $1.6 billion in 2020. As per data from a New York based research firm, there has been a surge of 620% in the EU which mainly accounted for 37% of all EV imports. 

Both sides have conflicting views on this topic. On one hand the EU bloc aims at protecting their own industry. While on the other hand the world’s second largest economy identifies this as a selfish move which counters global trade rules. These rules are meant to encourage healthy competition, boost economic development and avoid any possible conflicts.  

An anti-subsidy investigation was introduced as the EU believed that China benefits from unfair subsidies. This was after the formal inquiry to discover any breach of regulations on the China made EVs by the EU. Such an investigation takes place when a valid complaint is raised from any EU industry. There must be enough evidence against the country proving that they are subsiding companies by exporting products to the EU and causing damage.  

The probe found that the Chinese EV companies were benefitting in many ways. Some of which included income tax reductions, exemption from value-added tax and dividend tax, government provision for goods and services for lesser remuneration and many more. 

The tariffs levied by the EU on these Chinese companies depend on their negotiation with the EU and brands. The EV companies that have cooperated in the probe will be subjected to weighted average duty of 21% while those that did not cooperate face a residual duty of 38.1%

The bloc has so far charged BYD which is taken over by Tesla Motors with 17.4%, Geely with 20% and Saic with 38.1%. 

While on the other side China has not taken it well. The companies have opposed the decision and expressed their willingness to make things better. China’s Ministry of Commerce said that if the EU is sincerely open to negotiation then China will accommodate all concerns. 

According to Germany’s Transport Minister. any retaliation towards China would project the same picture as the trade war with the US under the former President Donald Trump. Many others oppose the idea calling the EU tariffs brutal. Among many that oppose the European car duties, Stellantis, Europe’s second largest car manufacturer and the owner of the Chrysler, Dodge, Jeep, Maserati and Peugeot brands, said it would not support actions that “contribute to the world fragmentation” of trade. 

The traffic will impact the consumers and they will bear the brunt as this would lead to an increase in prices of the imported Chinese EVs in Europe. This will further limit the adoption rates and choices. Meanwhile the Chinese EVs are unlikely to be affected financially due to growth and good performance. Chinese automakers could also utilize this chance to broaden their reach and create bases in other regions such as the Middle East and Latin America. To reduce the effects of tariffs, they are likely to shift production to the EU and form partnerships with European companies first.

In any case the EU decides against imposing tariffs or reduces them down to a common point which is acceptable by both parties then it can prevent a trade war from starting. It could diffuse tensions and avoid any international conflict with the bloc. This decision might strengthen trade relations with China, help EV manufacturers keep their competitive advantage in Europe, and encourage broader use of EVs by European consumers.

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