Beijing announced on Wednesday that it had filed a complaint with the World Trade Organization over the European Union’s decision to impose heavy customs duties on Chinese-made electric cars.
The additional taxes of up to 35% were announced on Tuesday after an EU investigation found that Chinese state subsidies were undermining European carmakers, but the move faced opposition from Germany and Hungary, which fear angering Beijing and sparking a bitter trade war.
China criticized Brussels’ decision on Wednesday morning, saying it “neither agrees nor accepts” the tariffs and has filed a complaint under the World Trade Organization’s dispute settlement mechanism.
“China will take all necessary measures to strictly protect the legitimate rights and interests of Chinese enterprises,” Beijing’s Ministry of Commerce said.
“By adopting these proportionate and targeted measures after a rigorous investigation, we are defending fair market practices and the European industrial base,” EU Trade Commissioner Valdis Dombrovskis said on Tuesday.
“We welcome competition, including in the electric car sector, but it must be supported by fairness and equal opportunities,” he said.
But Germany’s main car industry association warned that the tariffs raised the risk of a “far-reaching trade conflict”, while a Chinese trade group criticized the “politically motivated” decision even as it urged dialogue between the two sides.
The duties will come in addition to the current 10% on electric vehicle imports from China.
The decision became law after it was published in the Official Journal of the European Union on Tuesday, and the fees will enter into force as of Wednesday.
Once this is done, the tariffs will be final and last for five years.
The surcharges also apply, at different rates, to vehicles made in China by foreign groups such as Tesla, which faces a 7.8% tariff.
Chinese auto giant Geely – one of the country’s biggest sellers of electric vehicles – faces an additional 18.8% tariff, while SAIC will reach the highest rate at 35.3%.
Troubled companies
Tariffs are not supported by a majority of the EU’s 27 member states, but in a vote early this month, opposition was not enough to block them, which would have required at least 15 countries representing 65% of the bloc’s population.
The European Union launched the investigation in an attempt to protect the auto industry, which employs about 14 million people.
France, which pushed for the investigation, welcomed the decision.
French Finance Minister Antoine Arman said in a statement: “The European Union is taking a decisive decision to protect and defend our commercial interests, at a time when our automotive industry needs our support more than ever.”
But Europe’s major carmakers, including German car giant Volkswagen, have criticized the EU’s approach and urged Brussels to resolve the issue through talks.
Additional tariffs are “a step backwards for global free trade and therefore for prosperity, job preservation and growth in Europe,” Hildegard Mueller, head of the German Automotive Industry Association, said on Tuesday after the announcement.
Volkswagen, which has been hit hard by growing competition in China, previously said the tariffs would not improve the competitiveness of the European auto industry.
The warning came weeks before the struggling giant announced plans on Monday to close at least three factories in Germany and eliminate tens of thousands of jobs.
Retaliatory movements
Talks between the European Union and China are continuing, and it is possible to raise tariffs if a satisfactory agreement is reached, but officials from both sides indicated differences.
Discussions focused on minimum prices that would replace duties and force Chinese automakers to sell cars at a certain cost to offset subsidies.
“We are open to a potential alternative solution that is effective in addressing the identified problems and is WTO-compliant,” Dombrovskis said.
The Chinese Chamber of Commerce with the European Union urged Brussels and Beijing to “accelerate talks on setting minimum prices and, ultimately, abolishing these tariffs.”
The EU may now face Chinese retaliation, as Beijing already said on October 8 that it would impose temporary tariffs on European brandy.
Beijing has also launched investigations into EU subsidies for some dairy and pork products imported into China.
Trade tensions between China and the European Union are not limited to electric cars, as Brussels is also considering Chinese support for solar panels and wind turbines.
The European Union is not alone in imposing heavy customs duties on Chinese electric cars.
In recent months, Canada and the United States have imposed much higher tariffs of 100% on Chinese electric vehicle imports.
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