Tariffs on Chinese EVs divide EU - but is there hope of a solution?

The European Commission's decision to press ahead with tariffs on Chinese-made electric vehicles threatens to undermine decades of cooperation between China and the EU, and endangers climate-change goals.

That's the view of the Xinhua news agency and they are not on their own.

On Friday, the EU said it would push forward with hefty tariffs on China-made EVs, even after the bloc's largest economy Germany rejected them. 

The dispute is its biggest trade row with Beijing in a decade.

Xinhua news agency said the move revealed a "deep-seated protectionist impulse."

"Instead of fostering cooperation, these tariffs risk sparking a trade conflict that could harm not only China-EU relations but also Europe's own ambition for a green transition," it said. "The path forward is clear: Protectionist tariffs must be abandoned in favor of continued negotiations."

European imports of Chinese-made EVs have soared in recent years, raising concerns among some domestic EV producers that they could suffer significant losses from a wave of cheaper Chinese electric vehicles.

The proposed duties on EVs built in China of up to 45 percent would cost car makers billions of extra dollars to bring cars into the bloc and are set to be imposed from next month for five years.

The Commission, which oversees the bloc's trade policy, has said the tariffs would counter what it sees as unfair Chinese subsidies after a year-long anti-subsidy investigation. 

'Unfair and unreasonable'

However, it said that it would continue talks with Beijing - a possible compromise could be to set minimum sales prices.

China's Commerce Ministry has expressed strong opposition to the planned tariffs, calling them "unfair, non-compliant and unreasonable." 

It has launched a challenge to them at the World Trade Organization.

It is fair to say there has been a mixed reaction to these EU tariffs. 

What has the reaction been across Europe? 

"The electric vehicle sector holds huge potential for Europe's future competitiveness and green industrial leadership,”said European Commission President Ursula von der Leyen.

"EU car manufacturers and related sectors are already investing and innovating to fully develop this potential. Wherever we find evidence that their efforts are being impeded by market distortions and unfair competition, we will act decisively.

"And we will do this in full respect of our EU and international obligations - because Europe plays by the rules, within its borders and globally. This anti-subsidy investigation will be thorough, fair, and fact-based."

Trade war

German Finance Minister Christian Lindner posted on X that the EU Commission "should not trigger a trade war despite the vote in favor of possible punitive tariffs against China. We need a negotiated solution."

This German call for negotiation was supported by Spain's Economy Minister Carlos Cuerpo.

"Beyond the imposition of tariffs, we have to continue going forward in this negotiation, since it is important to protect a sector as strategic as the automobile sector while avoiding an escalation of trade measures, which could be detrimental to all," said Cuerpo.

Italy's Industry Minister Adolfo Urso also said that the country is "against any hypothesis of a 'trade war' and will work together to avoid it.

"We must preserve the industrial and commercial partnership with China, with whom we want to continue working in a win-win logic based on the principle of reciprocity, also for the sake of global economic stability," he added.

Meanwhile, Sweden's Minister For Foreign Trade Benjamin Dousa expressed hope for a positive way forward, saying: "The best thing would be that China and the EU together can come to an agreement in relation to this problem."

An economic cold war?

Hungary is not in favor of the move.

"What they are making us do right now, or what the EU wants to do, is an economic cold war," warned Viktor Orban, Hungary's Prime Minister.

There are some who support the tariffs, such as the French Automakers Association.

"It is a good thing that a decision has received support from member states for the adoption of customs duties. We are in favor of free trade but within the framework of fair rules," said the body.

But German car manufacturer BMW warned that "the vote is a fatal signal" for the European automotive industry.

"What is needed now is a quick settlement between the EU Commission and China to prevent a trade conflict from which no one gains," said the company's CEO Oliver Zipse.

"The fact that Germany voted against the tariffs is an important signal and increases the chances for a negotiated settlement."

Potential damage

Volksvagen, another major German car manufacturer, shared the sentiment.

"We stand by our position that the planned tariffs are the wrong approach and would not improve the competitiveness of the European automotive industry," said the company in a statement.

"We appeal to the EU Commission and the Chinese government to constructively continue the ongoing negotiations for a political solution."

Hildegard Mueller, President of the German Association of the Automotive Industry VDA, pointed out: "The proposed tariffs would not only further increase the risk of a mutual trade conflict, but would also make vehicles considerably more expensive for consumers."

"The potential damage that could be caused by countervailing duties is therefore greater than the potential benefits of the instrument.

"Increasingly sealing off the market is not an option for the European - and in particular the German automotive industry."

All eyes and ears await these negotiations over a possible solution to help the Chinese and EU motor markets drive closer together.   

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