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The European Union is pressing ahead with tariffs on Chinese electric cars that could bring in more than 2 billion euros a year, ignoring warnings from the German government that it risks triggering a costly trade war with China.
The European Commission is set to inform automakers on Wednesday that it will impose provisional tariffs of up to 25% on imported Chinese-made electric vehicles starting next month, people familiar with the decision said, as Brussels argues Chinese EV makers benefit from cheaper subsidies than their European rivals.
The tariffs pushed by France and Spain would add billions of euros to the EU budget each year as sales of Chinese-made EVs grow in Europe. China, the EU’s largest trading partner, will export 10 billion euros worth of electric vehicles to the EU in 2023, doubling its market share to 8% from last year, according to analysts at Rhodium Group.
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Beijing has threatened to retaliate as it tries to persuade most EU member states to oppose the new tariffs, which would be on top of the 10% tariffs the EU currently imposes. China already imposes a 15% tariff on European EVs.
Germany, Sweden and Hungary have said they will not approve the move, fearing Chinese retaliation. EU officials say Berlin has pressured von der Leyen, who is seeking a second term as European Commission president, to drop the anti-subsidy investigation.
German Chancellor Olaf Scholz recently warned that “isolation and illegal tariff barriers will only make everything more expensive and everyone poorer in the end.”
But intense lobbying by the Scholz administration has been “too ineffective,” said a person familiar with the process, who said the European Commission plans to raise tariffs to about 35%, still far short of the 100% tariffs imposed by the United States.
The European tariffs would hit Chinese manufacturers such as BYD and SAIC, as well as companies like Tesla that have factories in China. The tariffs could vary from manufacturer to manufacturer depending on the level of subsidies the EU claims to have identified.
The Kiel Institute, an economic think tank, calculated that a 20% tariff on Chinese-made electric vehicles would reduce imports by a quarter, which would amount to an estimated 125,000 vehicles worth about $4 billion in 2023, assuming 500,000 cars are imported.
“This decline will be largely offset by increased production within the EU and lower EV export volumes, but this will likely mean significantly higher prices for end consumers,” the researchers concluded.
The European Commission expects Chinese-made EVs to have a 15% market share in the EU next year, with prices typically 20% cheaper than EU-made models.
EU Trade Commissioner Valdis Dombrovskis acknowledged that EVs are essential to the green transition when he published the investigation in October, but he added that “competition must be fair.”
Officials said the ministry had collected evidence that Chinese automakers and their suppliers received subsidized loans, tax breaks and cheap land.
Many EU automakers have condemned the plan, fearing China will do the same or shut them out of the market. European brands are expected to account for about 6% of electric vehicle sales in China in 2022.
Germany exported 216,299 cars to China in 2023, a 15% decrease from the previous year. Brands such as Mercedes and Volkswagen also have factories in Germany.
One of the Chinese companies under investigation, Geely Automobile, owns Sweden’s Volvo. Prime Minister Ulf Christersson has joined Scholz and Hungarian Prime Minister Viktor Orban, who has sought to attract Chinese EV investment, in openly opposing the EU tariffs.
To overturn the European Commission’s decision on the tariffs, the three leaders would need the cooperation of at least 11 other governments, with other central European countries such as the Czech Republic and Slovakia expected to join in the opposition.
Food and luxury goods exporters such as Italy are also concerned about retaliatory measures against their products.
But France, which pushed for the investigation to protect its own industry and force China to invest in local production, is unlikely to back down. Spain, another big auto country, has also signaled its support for the tariffs.
Member states are asked to vote on the tariffs by Nov. 2. Firm tariffs are usually imposed for five years.
