On 12 June 2024, the European Commission announced additional preliminary tariffs of up to 38% on Chinese electric vehicles (EVs). This is based on an EU anti-subsidy investigation, which found that China is extensively subsidising its automotive sector. The United States also recently raised comparable tariffs to 100%. At the same time, some large European car manufacturers are anxious about potential retaliatory measures by China. Anton Möller spoke to Anna Cavazzini, Member of European Parliament with the Greens/EFA Group and former Chair of the European Parliament’s Internal Market and Consumer Protection Committee, about the EU’s tariff announcement.
Why did the European Commission levy this tariff now, and do you agree with this decision?
The EU tariffs on Chinese electric cars stem from a rules-based, WTO-compatible investigation by the EU Commission as part of anti-subsidy measures, which I welcome. Initiated ex officio in October 2023, this procedure was based on strong evidence that European industry would suffer economic damage due to unlawful state subsidies for Chinese producers and supply chains. The duties imposed by the EU are proportionate to the subsidies identified, and the injury suffered by EU producers.
The USA had already announced punitive tariffs of 100% on Chinese electric cars on 14 May 2024, but this is not comparable to the EU’s procedure. The European Commission had started its investigation before the US’s decision to increase tariffs. It is beneficial that the EU has acted now to prevent the redirection of Chinese cars from the US market to the EU market, safeguarding the European automotive industry and its well-paying jobs.
One could argue that if China wants to subsidize EVs sold in Europe, it can make the mobility transition cheaper for Europeans. Wouldn’t this be good for our transition efforts?
The EU faces concrete threats from Chinese EVs flooding the market, recalling the heavy precedent of solar panels. The EU PV industry was lost to Chinese dumping due to a late and weak response in 2012, leading to over-reliance on China for PV installations. While affordable green goods benefit consumers, dumping and certain subsidies are illegal. Can we afford a green transition under unfair market conditions? The potential impact on jobs is significant. The EU automotive industry is a labor-intensive sector with high unionization and good working conditions, and it could face severe social impacts. Chinese EVs are expected to capture 15% of the EU market within two years, up from 0% just a few years ago and 8% today, posing a credible threat to the EU automotive industry with social impact risks being enormous.
There are concerns that China would retaliate to European tariffs, by introducing trade restrictive measures themselves. Do you see this risk, and how should the EU deal with it?
Certainly there is. China has generally increased its coercive practices over the last few years. More recently, China has introduced export controls on gallium and germanium in response to a Dutch export ban on lithography technology. However, is this trade war unavoidable and, specifically, can this trade war be avoided by renouncing the use of a legitimate tool? Probably not. Moreover, while the risk of Chinese retaliation is intangible, the risk of losing the European automotive industry and its well-paying jobs is very concrete. The EU’s decision to impose tariffs on Chinese electric cars is based on a rules-based, WTO-compatible investigation into unlawful state subsidies. This action is necessary to protect European industry from economic damage. Despite the potential for Chinese retaliation, the EU must address the clear and present danger to its automotive sector.