EU to Impose Tariffs on Chinese Electric Vehicles from July 4... Tariff Rates to Be Confidentially Notified Next Week

Notification Triggered by Hearing on Subsidy Investigation
"Complaints Will Arise Regardless of Tax Rate" Also Pointed Out

The European Union (EU) Commission is scheduled to impose provisional tariffs on Chinese-made electric vehicles starting from the 4th of next month, according to a report by the Hong Kong South China Morning Post (SCMP) on the 5th, citing EU officials.

SCMP explained, "The China Association of Automobile Manufacturers and business representatives met with the Commission's Trade Department in Brussels on the 3rd for a hearing related to the EU's investigation into subsidies for Chinese electric vehicles," adding, "At the hearing, companies were informed that provisional tariffs are expected to be imposed on July 4th." The tariff rates, which have not yet been disclosed, are expected to be confidentially notified to companies next week.

[Image source=Reuters Yonhap News]

Initially, the decision on whether to impose tariffs and the tariff rates were expected to be announced on the 5th, but the Commission postponed this to the 4th of next month. After imposing provisional tariffs, the Commission is expected to consult with member states for about four months to gain majority support from member states to convert these into permanent tariffs. However, some countries, including Germany, have clearly expressed opposition and are conducting lobbying activities.

The current tariff imposed by the EU on imported cars, including those from China, is 10%, but tariffs on imports related to illegal subsidies average around 19%. According to the German research institute, the Kiel Institute for the World Economy, if the EU imposes a 20% tariff on Chinese electric vehicles, imports of electric vehicles from China are expected to decrease by $3.8 billion (approximately 5.225 trillion KRW). This corresponds to about one-quarter of current imports.

The US consulting firm Rhodium Group forecasts that the tariffs imposed by the EU will be in the range of 15-30%, but even if higher tariffs are imposed, Chinese-based companies are still expected to make profits. In its report, Rhodium Group stated, "For Europe to become an unattractive market for Chinese electric vehicle exporters, tariffs would need to be between 40-50%," adding that vertically integrated companies like BYD would require even higher tariffs.

SCMP predicted, "Regardless of the tariff rate, the imposition of tariffs will inevitably anger stakeholders," and "If the tariff rate is too low, it will not significantly impact imports but will only provoke retaliation from China," expressing dissatisfaction.

In fact, China has warned of retaliatory measures if tariffs are imposed. After recently meeting with Spanish businesspeople, Wang Wentao, Minister of Commerce, stated in a press release, "If Europe does not keep its promises and continues to suppress Chinese companies, China will take all necessary measures to safeguard its legitimate interests." Additionally, China has currently initiated anti-dumping investigations on imports of EU pork, dairy products, large-engine vehicles, and aircraft brandy.