It’s now official: electric vehicles manufactured in China will benefit from additional customs duties in the European Union of between 35.3% and 7.8%. The decision, left in the hands of the European Commission due to the division of member states, was published this Tuesday in the Official Journal of the EU and comes into force this Wednesday after the failure of negotiations with Beijing. Although community sources emphasize that “progress” has been made in recent weeks, “significant gaps” persist which prevent the community government from reversing course.
The introduction of these rates, in addition to the current 10%, was the main measure adopted by the EU to confront the trade war with Beijing. Ursula von der Leyen announced during the last debate on the state of the EU in September 2023 an investigation into the subsidies that the Chinese government grants to the automobile industry, whose market does not absorb all the production and floods that European. Brussels’ intention was to avoid a situation like that of solar energy in which China would become a power in the Community market to the detriment of European companies thanks to its state aid.
Once the investigation concluded that unfair competition existed, tariffs began to be applied, but only in the form of bank guarantees. Since then, negotiations with the Chinese government have intensified. There have been high-level meetings – the latest being a telephone conversation between Executive Vice-President Valdis Dombrovskis and Trade Minister Wang Wentao – and above all of a technical nature, but the conditions are not right to achieve an agreement. it would do the opposite.
From the start, China opposed the withdrawal of subsidies, so negotiations focused on a “price commitment” whereby exporters agree not to sell below a predetermined quantity. This would eliminate the competitive advantage that vehicles manufactured by the Asian giant have over others. However, the offers made so far by the Chinese government are “insufficient”, according to community sources, who nevertheless see some “improvements” in the latest proposals.
“Some progress has been made in these discussions to reach a compromise that meets our legal criteria, but we are not there yet,” say these sources who emphasize that the objective is to “defend European industry”. “It’s about trying to level the playing field and have fair competition,” they explain.
While “significant gaps” remain, tariffs will begin to apply. During the process, the percentages were lowered slightly for “technical adjustments” and “error correction” which were identified as double taxation of certain initial issues. Finally, companies that did not cooperate with the investigation and SAIC will benefit from additional rates of 35.3% and, in general, those that cooperated, 20.7%. Below will be Geely (18.8%), BYD (17%) and Tesla (7.8%) who traded on their own.
“Importers can request a refund if they consider that their exporting producer is not subsidized or if its subsidy margin is lower than the duties paid by importers. “This request must be duly justified and supported by respective evidence,” specifies the European Commission in a press release.
Division within the EU over economic interests in China
Tariffs have rocked the waters within the EU. The European automobile industry opposed this decision because many manufacturers export from the Asian giant and this decision costs them dearly, in addition to fearing counter-tariffs. This has led countries like Germany to campaign against the European Commission’s decision.
The important economic interests of many Chinese countries have also intersected. During a visit to this country, Pedro Sánchez changed the position that Spain had maintained and asked to “reconsider” the application of customs tariffs. This movement worried Brussels, which accused him of giving priority to the interests of Spain by obtaining succulent contracts from this country, such as that of two automobile factories. It is also one of the countries most affected by the retaliations announced by Beijing: customs duties on pork (one of Spain’s main export sectors), liquors such as brandy and dairy products. . The European Commission has started a battle before the World Trade Organization because it considers accusations of unfair competition from China in these areas to be unfounded.
Ultimately, Spain abstained in the final vote in which the division within the EU was evident: ten countries were in favor of an increase in customs duties, five countries rejected it and the majority (twelve ) abstained.
The removal of customs duties required a qualified majority within the EU (at least fifteen member states representing 65% of the population should have voted against), which is why the European Commission decided to move forward . Ursula von der Leyen also seeks to show firmness in the face of the trade war, at a time when Europe must practically reinvent itself to increase its competitiveness.
The rates which now come into force are for a period of five years. However, negotiations with the Chinese government are continuing and it is possible to reach an agreement at any time to reverse this imposition. The European Commission points out that this can be negotiated individually with exporters.
