EU’s EV tariffs will sabotage its ambition to be the leader of the green transition

Following an investigation that concluded the Chinese electric vehicle industry “benefits from unfair subsidization”, the European Commission has announced it is to impose additional tariffs of 17.4 percent to 38.1 percent on Chinese EV imports.

Industry insiders say that the tariffs will hardly frustrate the momentum of Chinese-made EVs in the European market, or help their local counterparts compete, and some take them as being a bargaining chip for a better deal in subsequent negotiations with China.

Yet even if the pending tariffs do not translate into debilitating damage to Chinese EV manufacturers, they indicate a very harmful turn in European policies. They betray the European Union’s long-standing commitment to free trade, and signal its resort to interventionist, protectionist tools.

Although Brussels has so far sounded like it does have reservations about Washington’s enthusiasm for a trade assault, its latest move targeting the Chinese EV industry could, if not managed well, be the first shots in what would be a damaging trade war between China and the EU.

Beijing is opposed to any form of trade war. With the trade tit-for-tat with Washington still ongoing, the last thing it wants is another trade war with one of its most important trading partners. Beijing has no major geopolitical conflict with Brussels. For decades, bilateral political relations have been generally fine and stable; and economic and trade ties between China and the EU have thrived.

The planned punitive tariffs, however, risk reversing that trend and hurting both economies badly, especially at a time when both economies are struggling to get firing on all cylinders again. The Chinese and European economies are interwoven so broadly and deeply that when one side gets hurt, both do. This at least in part explains why both Chinese and European carmakers participating in a closed-door meeting on Tuesday voiced opposition to Brussels’ proposal of higher tariffs. That meeting convened by the Chinese Commerce Ministry reportedly featured four Chinese and six European automakers as well as related chambers of commerce, industry associations and research institutions. In the discussions, the representatives of some Chinese enterprises reportedly called for the government to take “the harshest measures” against the European side. The idea mooted was to raise import tariffs for high-displacement European vehicles to 25 percent, which they argued was consistent both with World Trade Organization rules and the country’s low-carbon development goals. But such a retaliatory move would not be conducive to resolving the trade concerns bothering the two sides.

Yet if Brussels goes ahead with its tariffs, it will indeed leave Beijing no option but to retaliate. In a statement, the Commerce Ministry vowed to take “all necessary measures to firmly defend the legitimate rights and interests of Chinese companies”. German Chancellor Olaf Scholz has voiced his concerns about the EU Commission’s move, arguing protectionism “ultimately just makes everything more expensive and everyone poorer”. “We do not close our market to foreign companies because we do not want that for our companies either,” he said on Saturday.

All European automakers present at the Commerce Ministry meeting expressed opposition to the impending tariffs, and expressed their hopes for China and Europe to engage in negotiations as soon as possible, so as to avoid an escalation of the bilateral trade frictions.

The same day, Vice-Premier Ding Xuexiang conveyed such concerns to European Commission Executive Vice-President Maros Sefcovic at the fifth EU-China High-Level Environment and Climate Dialogue in Brussels. The tariffs are “typical protectionism,” he said, “which is not conducive to the EU’s green transition, and detrimental to the overall situation of global cooperation on climate response”.

[Abridged]

Editorial, China Daily