EU Approves Tariffs on Chinese Electric Vehicles Following Anti-Subsidy Probe

| Image Credits: "Geely assembly line in Beilun, Ningbo" by Siyuwj

The European Commission's proposal to impose definitive countervailing duties on battery electric vehicles (BEVs) imported from China has received the necessary approval from EU Member States. 

This marks a significant milestone in the Commission’s efforts to address unfair trade practices by China, concluding an extensive anti-subsidy investigation. The approved tariffs aim to counteract the competitive advantages enjoyed by Chinese EV manufacturers due to substantial state subsidies, protecting the European automotive industry from further market distortion.

The Investigation and Findings

The anti-subsidy probe, initiated by the European Commission in September 2023, focused on China's growing dominance in the global electric vehicle market. European Commission highlighted the influx of cheap Chinese EVs, whose prices were kept artificially low due to extensive government subsidies. As part of the investigation, EU officials inspected over 100 Chinese car manufacturing sites and scrutinized major companies such as BYD, Geely, and SAIC. These firms were asked to submit detailed information regarding their operations and their financial relationship with the Chinese government.

The investigation revealed overwhelming evidence of state support permeating the entire EV supply chain—from raw material mining to the shipping of finished vehicles. The subsidies took many forms, including preferential loans, tax breaks, direct grants, and consumer incentives that mostly benefitted the manufacturers. The Commission concluded that these practices gave Chinese firms a significant price advantage, threatening the survival of European automakers and putting millions of jobs across Europe at risk.

Tariff Approval and Member State Reactions

Following these findings, the European Commission proposed additional tariffs on Chinese-made EVs, ranging from 7.8% for Tesla to 35.3% for SAIC. The tariffs will be in place for five years and are designed to level the playing field by closing the price gap between European and Chinese manufacturers. The proposal, which received the backing of a qualified majority of EU Member States, will apply on top of the existing 10% tariff on Chinese EV imports.

The vote highlighted divisions within the EU on trade policy with China. While France and Italy supported the tariffs from the outset, Hungary remained a vocal opponent, and Spain wavered before ultimately backing the measure. Germany, long a proponent of diplomatic engagement with Beijing, saw its attempts to block the tariffs fall short, signaling a shift in the bloc’s stance towards China.

A Win for Von der Leyen’s Tougher China Policy

The approval of these tariffs represents a significant victory for Ursula von der Leyen’s China policy. Since China joined the World Trade Organization (WTO) in 2001, the EU has largely taken a cautious approach toward Beijing, balancing economic interests with political considerations. However, von der Leyen has championed a more assertive stance, calling out China’s repressive domestic policies and its aggressive use of state subsidies to gain dominance in key industries like electric vehicles.

In her March 2023 speech, von der Leyen emphasized China’s ambitions to reshape the international order in its favor, using unfair trade practices as a tool for global economic influence. The anti-subsidy investigation into EVs was seen as a litmus test of this tougher policy. With the tariffs now approved, von der Leyen is expected to continue her hardline approach towards Beijing, consolidating a broader shift in how the EU manages its economic relationship with China.

Legal and Economic Implications

With the tariffs officially approved, the European Commission must now finalize its Implementing Regulation, which will detail the findings and the specific duties applied to each company. The regulation is required to be published in the Official Journal by 30 October 2024, solidifying the legal framework for the next five years.

The economic stakes are high for both Europe and China. The tariffs are designed to protect the European automotive sector, which employs millions of workers both directly and indirectly. According to the Commission’s estimates, without these measures, European automakers could face severe financial losses, and the entire EV industry could be destabilized.

At the same time, China has expressed strong opposition to the EU’s decision, calling the investigation a "naked protectionist act" and threatening retaliatory actions against key European industries, including dairy and pork. Despite these threats, the EU remains firm in its position, with ongoing diplomatic discussions focusing on finding alternative, WTO-compliant solutions. However, any such resolution would need to fully address the harmful effects of the subsidies, be enforceable, and be subject to continuous monitoring.

Sources/recommended read: 

• Member States support tariffs on imports of China BEVs (europa.eu)
• Von der Leyen's China policy faces moment of truth as EU countries vote on EV tariffs | Euronews