Customs duties on Chinese electric vehicles: the Commission regains control

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This Friday morning, the countries of the European Union failed to agree on the question of whether electric vehicles manufactured in China should be hit with higher customs duties. During a highly anticipated meeting, a vote resulted in too many abstentions (12 abstentions, 10 votes for, 5 against according to our information), forcing the European Commission to regain control to bring its proposal to fruition. its term.

While the result of Friday’s vote has not been made public, previous comments suggest that France, Italy and the Netherlands came out in favor of the proposal, while Hungary strongly opposed it. . Germany, whose powerful automotive sector had exerted strong pressure against customs duties, reportedly went from abstention to rejection at the last minute. Spain had also expressed its fears.

The high number of abstentions reflects long-standing doubts about how Europe should confront China. Although the political consensus says that Beijing’s unfair trade practices deserve a forceful and united response, fears of commercial retaliation appear to have softened the resolve of many capitals as the decisive date drew closer.

It is now at the Commission, which has the exclusive power to define the Union’s commercial policythat it is the responsibility to break the impasse and ensure that the tariffs are adopted.

Given that the Commission is very concerned about China’s massive use of subsidies to promote domestic producers and allow them to sell their electric vehicles at an artificially low price on global markets, the conclusion is far from surprising.

The EU executive previously warned that without strong action, EU carmakers would suffer unsustainable, if not irrecoverable, losses and be squeezed out of the lucrative net-zero mobility market, with painful consequences for 2.5 million direct jobs and 10.3 million indirect jobs across the European Union. European Union industry is already in turmoil due to high energy prices, weak consumer demand and fierce global competition.

The additional tariffs aim to offset the harmful effects of subsidies and close the price gap between Chinese and European companies. They vary depending on the brand and its level of cooperation in the Commission’s investigation (Tesla: 7.8%, BYD: 17%, Geely: 18.8%, SAIC: 35.3%) .

Concerning other producers in China who cooperated in the investigation but who were not the subject of individual sampling, incur an increase of 20.7% in additional customs duties (+35.3% for other companies, not having cooperated with the investigation).

The customs duties will come into effect in November and will be collected by customs officials.

They will be added to the current rate of 10%. In practice, this means that some Chinese automakers will soon have to pay customs duties of more than 45% when they try to introduce their products into the single market.

Beijing and Berlin, main losers

Friday’s resolution is sure to trigger Beijing’s fury.

From the outset, China denounced the Commission’s investigation as a “pure and simple protectionist act”, and has always denied the existence of subsidies qualifying the Commission’s conclusions as “artificially constructed and exaggerated” and threatened to take retaliatory measures against the European industries of dairy productsof brandy (link in English) and pork meatthus sounding the alarm in certain capitals.

At the same time, Chinese authorities have engaged in intense discussions with their European Union counterparts to find a political solution that would avoid the imposition of additional duties. One of the possible options was for producers to commit to establishing prix minimums for their electric vehicles, although implementing this solution can be difficult and vulnerable to vulnerabilities.

Despite Friday’s resolution, EU-China negotiations set to continue until October 30deadline set by the Commission’s investigation.

The talks are also a priority for Germany, which fears Beijing’s response could further worsen the situation of its sluggish economy. German companies have spent the past two decades expanding their trade ties with China to sell their exports to an increasingly wealthy middle class. Any retaliatory measures could deal a serious blow to these well-established links.

“Of course we must protect our economy against unfair trade practices”Chancellor Olaf Scholz said this week. “However, our reaction as the EU must not harm us. This is why negotiations with China on electric vehicles must continue.”

That the tariffs are finally being implemented highlights Berlin’s diminishing influence in Brussels, where infighting within Olaf Scholz’s three-party coalition has often caused frustration and exasperation among diplomats.

The introduction of customs duties also constitutes an endorsement of Ursula von der Leyen’s China policy. The head of the Commission has drawn praise for her lucid and pragmatic strategy towards Beijing. It thus put an end to the political complacency which is today held responsible for the myriad of critical dependencies that the European Union has created with China.