The European Union (EU) is poised to impose tariffs on electric cars manufactured in China to protect European carmakers from cheap Chinese imports. Experts expect EU leaders to inform China that it will levy taxes on battery electric cars imported from the East Asian nation sometime this week, a move that could potentially start a trade war between the regional bloc and China.
Many experts believe that once the EU launches the first shot, China will push back with retaliatory measures that affect European exports ranging from cognac to cheese. The EU first took action against Chinese EVs last year when Chinese carmakers began flooding the European market with cheap battery electric cars and undercutting local carmakers.
Billions of dollars in subsidies provided by Beijing for the past decade have helped China’s EV makers manufacture electric cars at significantly lower prices and allowed them to sell their electric cars at lower prices compared to their Western counterparts. As Chinese EVs surged into the EU in massive numbers, the European Commission began investigating the feasibility of slapping the cheap EVs with tariffs.
EU leaders could issue a formal predisclosure of tariffs as early as this week after months of investigating whether Beijing was artificially lowering electric car prices by pumping billions of dollars’ worth of subsidies into the Chinese EV industry. If the EU moves forward with the Chinese EV tariffs, electric vehicle companies in China will find it incredibly difficult to profitably export to two of the world’s largest EV markets.
With the Biden administration recently levying 100% tariffs and EU leaders investigating Chinese EV subsidies, car manufacturers in Beijing are already preparing themselves for European tariffs. Furthermore, experts see Chinese leadership striking back at the tariffs with levies on a variety of EU exports. Last month, European Commission president Ursula von der Leyen said the world can’t absorb surplus production from China and said that the EU wouldn’t waver from protecting the regional bloc’s industries and jobs.
The EU launched its antisubsidy investigation partly due to suspicions that Chinese carmakers were flooding the EU with more affordable electric cars due to overcapacity and reduced electric vehicle demand in China. There are at least 10 more EU inquiries into Chinese subsidies on the export of wind turbines, heat pumps and solar panels, among others. According to the energy sector, these cheap imports are undercutting European producers by a whopping 50%.
If the European Commission concludes its Chinese state-aid investigation this week, it will send a formal prenotification of tariffs to Beijing and grant the country four weeks to provide any evidence that disproves the probe.
Electric vehicle makers such as Cenntro Electric Group Ltd. (NASDAQ: CENN) will likely keep a close eye on these developments to see how the broader EV industry could be affected by any countermeasures that China takes once the sanctions are announced.
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