The European Union has approved imposing tariffs on Chinese electric vehicles. The new taxes on imports from China will come into effect from November and differ between car brands.

Mercedes-Benz called Friday's move a "mistake", while China's Geely Holding said the measures could hinder economic and trade relations. BYD faces European tariffs of 17 per cent, Geely will have duties of 19 per cent and SAIC faces taxes of 35 per cent on its vehicles destined for the EU.

The EU said it wants to protect its auto industry from being overtaken by what it says are state-subsidised electric cars from China.

Beijing calls the policy "naked protectionism" and the Chinese government has warned of major consequences for bilateral trade if the EU enforces the auto tariffs.

Crunch vote in Brussels

France and Italy supported the measures but Germany was one of a handful of countries that voted against the plans, saying it feared a possible trade war with China.

The vote in Brussels on October 4 ended with too many countries abstaining, which meant the European Commission had the casting vote, and the EU's executive arm was in favour of the new tariffs.

There is a possibility of more consultations between Brussels and Beijing. The EU released a statement on Friday confirming the imposition of tariffs but added: "The EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission's investigation, monitorable and enforceable."

Contentious investigation results in green light for tariffs

An EU investigation found that China's state subsidies were unfairly undermining European car competitors. China says the rulings were "non-compliant, unreasonable and unfair".

Beijing also filed an official complaint with the WTO about the inquiry, claiming that the investigation "lacks a factual and legal basis" and "seriously violates" the trade body's rules. The EU said new tariffs would help it protect its car industry.

Registration of China-built electric vehicles rose from 3.5 per cent of the EU market in 2020 to 27 per cent in the second quarter of this year and Chinese car brands jumped from 2 per cent to 14 per cent.

"Additional tariffs will not solve problems"

China's Commerce Ministry responded by saying: "China firmly opposes the EU's unfair, non-compliant and unreasonable protectionist practices in this case and firmly opposes the EU's imposition of anti-subsidy duties on Chinese electric vehicles.

"China hopes that the EU will clearly realize that imposing additional tariffs will not solve any problems but will only shake and hinder the confidence and determination of Chinese companies to invest and co-operate in Europe.

"China urges the EU to truly demonstrate practical actions to implement its political will and return to the right track of resolving trade frictions through consultation."

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