As many experts predicted, China has retaliated against the European Union’s recent decision to levy provisional tariffs on Chinese electric vehicles. The Commerce Ministry in China launched an antidumping investigation into pork exports from Europe this week, a move many pundits believe is in response to the EU’s tariffs on electric cars imported from China.
Tensions between China and the EU began last year when the European Commission began investigating the influx of cheap Chinese electric cars into the regional bloc. EU leadership claimed that China had artificially powered electric vehicle prices by pumping billions of dollars’ worth of subsidies into China’s EV industry and was threatening to undercut European carmakers in their local markets.
Shortly after the Biden administration announced that it would levy a 100% import tariff on electric vehicles manufactured by Chinese automakers, the EU moved forward with its Chinese EV subsidies investigation. If EU leaders have their way, they could levy provisional tariffs of 17.4% to 38.8% on Chinese-made electric cars from December 2024.
However, many experts predicted that China would retaliate against the EU, likely by targeting the European farmers who export produce to the massive Chinese market. Although China’s Commerce Ministry didn’t include the recent EU tariffs in its announcement about the antidumping investigation, most pundits see the investigation as retaliation for the EU‘s decision to levy provisional tariffs on Chinese-made electric vehicles.
On top of showing that China is willing to play ball and push back against EU tariffs, the antidumping investigation into pork exports from the EU gives China a bargaining chip in its escalating trade war with the European Union. If China turns its attention to European carmakers, it could do major damage against German companies such as Mercedes Benz and BMW, which draw a significant portion of their revenue from the Chinese market.
China has made major strides in the nascent electric-vehicle industry and is now head and shoulders ahead of most of the competition. The country plays a key role in the extraction and processing of key electric-vehicle raw materials, and the majority of the world’s automakers are reliant on China for the supply of critical EV components. Furthermore, the Chinese government has provided local carmakers with billions of dollars in subsidies, allowing them to reduce their operational costs and cut down EV prices significantly.
As a result, Chinese carmakers currently sell the most affordable electric cars in most markets and have begun exporting to foreign markets in masse. With the U.S. market largely inaccessible, these companies set their eyes on Europe and began flooding the continent with affordable electric cars last year before attracting the European Commission’s attention. Chinese officials later protested the EU’s investigation into China’s EV subsidy program, referring to it as “typical protectionist behavior” that isn’t in line with the World Trade Organization’s rules.
It remains to be seen how the tariffs imposed by the EU on China-made EVs will affect brands such as Tesla Inc. (NASDAQ: TSLA), which have their operations in China and ship those models to different global markets.
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