EU-China tariff row deepens amid warnings of 'economic Cold War'

The European Union has slapped additional tariffs of up to 35.3 percent on Chinese-made electric vehicles. The move comes over a year since the EU launched an anti-subsidy probe accusing Beijing of flooding the European market with heavily subsidized EVs.

The duties have been imposed for a period of five years as negotiations between EU and Chinese trade delegations continue. European trade officials recently warned, however, that "significant gaps remain" in those talks. A senior EU official said on Tuesday that, during negotiations to date, there have been "broad disagreements over each and every fact."

The European Commission launched its investigation in September 2023 based, according to the Commission, on growing evidence about the rise of low-priced exports of EVs coming from China.

Chinese EV market share in the European Union was below one percent in 2019 and now stands at eight percent. The EU estimates that by 2025, that could reach 15 percent. Chinese-made electric vehicles are roughly 20 percent cheaper than models made by European car manufacturers. A senior EU official says the goal of the investigation was to level the playing field and says that these duties go some way towards doing that.

Among the car makers impacted, BYD will be subject to a 17 percent duty, Geely 18.8 percent and SAIC 35.3 percent. Teslas manufactured in China are also subject to a duty of 7.8 percent. These tariffs are in addition to the existing 10 percent duty already in effect.

'Violation'

China's Commerce Ministry described the new duties as "unfair, non-compliant and unreasonable protectionist practices." It also called them a serious violation of World Trade Organization rules and has contested the move with the trade body.

The tariff initiative became law on Tuesday but was voted on by EU member states back on October 4. Ten member states voted to roll out the tariffs on Chinese made electric vehicles. With a dozen more abstaining and five against, it was enough to commit the entire bloc.

The move remains divisive, especially amongst nations home to car industry giants.

"The Federal Government stands for open markets. Because Germany in particular, as a globally interconnected economy, is dependent on this," said a spokesperson for Germany's economy ministry.

'Economic Cold War'

Hungary's Prime Minister Viktor Orban has also warned about the prospect of an "economic Cold War" but Commission officials say the tariffs will help European car makers transition from combustion engines to electric.

As well as direct negotiations with Beijing, the EU is seeking to reach price undertaking arrangements with individual manufacturers, a move China has criticized.

Trade delegations from both the EU and China maintain that negotiations will now continue in an effort to find a mutually beneficial solution to this trade dispute