China has filed an official appeal at the World Trade Organization (WTO) over the import tariffs the European Union (EU) has levied on Chinese electric vehicles. The EU made this move after its investigations confirmed that Beijing had used billions of dollars’ worth of subsidies to artificially lower electric vehicles and undermine European automakers.
Electric vehicles manufactured in China are now subject to tariffs of up to 38% in European ports and have essentially lost the edge that would have allowed them to outcompete European carmakers. Furthermore, the United States also approved a 100% tariff on Chinese EVs, essentially locking the Asian country’s massive electric-vehicle industry out of one of the world’s largest EV markets.
With the EU also levying hefty tariffs on China-made electric vehicles, Chinese automakers are finding it increasingly difficult to sell their low-cost EVs cheaply in foreign markets. Hundreds of billions in subsidies have allowed Chinese EV makers to reduce their production costs and sell affordable electric cars, but U.S. and EU subsidies are quickly eroding this edge.
China, however, argues that its decade-long subsidy program is in line with the World Trade Organization’s rules. According to a statement from the Chinese Commerce Ministry, China has appealed the EU’s electric vehicle tariffs to safeguard its EV industry’s “interests and development rights.” The statement noted that the European Union’s electric-vehicle tariffs had no legal or factual basis, violated WTO policies and jeopardized the global cooperation needed to mitigate the climate change crisis.
China urged the European Union to reverse its “wrong practices” and commit to maintaining the trade and economic cooperation between both markets. A response from the European Commission noted that the commission would analyze China’s request and issue a response in line with WTO requirements through the proper channels. World Trade Organization spokesperson Ismail Dieng also issued a statement noting that the WTO had received China’s request and would provide further information once WTO members study the request.
China has monopolized the global electric-vehicle supply chain and either mines or processes the raw materials essential to electric vehicle production. The country’s EV subsidy program has also allowed its automakers to achieve a feat that has eluded carmakers in other major markets, making electric vehicles cheap.
As thousands of affordable Chinese electric cars began streaming into Europe, policymakers worried that local automakers would be unable to compete in their local markets. And with the U.S. essentially out of reach for Chinese automakers, Europe represented the largest overseas market for the dozens of EV manufacturers in China.
Unfortunately, now that the EU is levying import tariffs of up to 38%, China’s massive EV industry has run headlong into a roadblock that could prevent it from expanding its electric vehicle empire into Europe.
The outcome of these disputes filed at the WTO could have ramifications for other EV makers as well, such as VinFast Auto Ltd. (NASDAQ: VFS), because precedents could be set that impact the wider market.
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