15.06.2024

EU tariffs on China are too low to protect the European car industry

Temporary tariffs on Chinese-made electric vehicles (EVs) announced by the European Commission are too low to protect the European auto industry from state-subsidized car exports from Beijing. He stated this before Euractiv former General Counsel of the Office of the United States Trade Representative (USTR) Greta Paish.

It said the tariffs, which range from 17,4% to 38,1% and exceed the existing 10% tariff, are insufficient to "counteract" the high levels of government support that Chinese EV makers typically receive at all levels of the production process.

Paesch also noted that with some EV models selling for as little as $12 in China, tariffs of up to 000% would likely not be enough to rebalance the EU-China trade relationship.

“Tariffs are simply not enough to counteract all those factors that are at play. It's safe to assume that these vehicles will continue to come in and sell for roughly the same price today and continue to take market share away from European brand manufacturers in the EU. I think the tariffs are a good first step, but I am cautiously skeptical that they will be enough in the long term to ensure that the European industry remains as strong as it is today,” she warns.

Paish was involved in the development of the far tougher trade measures imposed by the US on China last month, which include 100% EV tariffs. She explained that in the case of the US, tariffs in the 10-30% range invariably fail to have a significant impact on imports from China.

European experts agree

Leading European analysts agree with Paesch that the announced tariffs are too low to have a significant adverse effect on Chinese exporters. Alicia García-Herrero, chief Asia-Pacific economist at French investment bank Natixis and senior fellow at Brussels-based think tank Bruegel, noted that not only were the tariffs too low, they were introduced too late – namely, after such as Brazil and Turkey, as well as the United States, have imposed similar measures.

“Tariffs are imposed because everyone else is doing it… It's not a strategy. It's just alignment,” she says.

García-Herrero added that with EU tariffs still significantly lower than their US equivalent, Europe will remain an attractive destination for Chinese EV exporters – even as the temporary measures become permanent when the EU executive reaches final decision in the coming months.

Sander Tordoar, chief economist at the Center for European Reform, believes that while the EU remains more inclined than the US to follow a rules-based approach, there appears to be a general alignment between the trade policies of Brussels and Washington.

"The alignment between the EU and the US is driven, in my view, by China's actions," he says.

China reserves the right to file a case at the WTO

China has said it reserves the right to take a case to the World Trade Organization over planned new EU tariffs on imports of its electric vehicles.

"China reserves the right to file a case at the WTO and take all necessary measures to resolutely protect the rights and interests of Chinese companies," said Beijing's commerce ministry spokesman He Yadong.

"This action lacks factual and legal basis and not only harms the legitimate rights and interests of China's electric vehicle industry, but will also distort automotive manufacturing and supply chains around the world, including in the European Union," he added.