China threatens EU and US with retaliatory vehicle tariffs up to 25%

Ten days after the Biden administration introduced a 100% tariff on on several categories of Chinese goods, including EVs, China has threatened to retaliate with tariffs on its own vehicle imports. Those threats are also targeted at the EU, as China’s Ministry is requesting the results of a recent probe while imploring Europe not to take the same action as the United States.

Trade tensions have continually risen among China, the European Union, and the US in recent years, with much of the drama surrounding imported EVs. Automakers in China, arguably the global leader in BEV technology and the most saturated market for New Energy Vehicles (NEVs), have begun expanding to new regions, including Europe.

Notable automakers like NIO, XPeng, BYD, and ZEEKR have all introduced multiple BEVs to countries in the EU, delivering advanced technology and luxury features at very competitive prices. The country has begun exporting so many EVs to Europe that automakers struggled to find ships to deliver them.

The new entry perturbed local EU automakers, some of which have lagged in EV adoption, inciting a probe into the Chinese automakers that the European Commission eventually determined have been “unfairly” subsidized as exports into the region. As a result, Europe has threatened tariffs on imports of vehicles built in China.

Across the pond, the US has already taken stern action on international trade with China, although none of the foreign automakers mentioned above have begun selling their EVs there. In late March, China’s Ministry of Commerce filed a complaint to the World Trade Organization targeting the US’ Inflation Reduction Act, deeming the policy unfair while imploring the US to play fair and follow the organization’s trade rules, citing the need for more EVs more quickly to battle climate change.

Instead, the Biden administration recently bolstered tariffs on goods originating from China, including solar panels, batteries, medical supplies, and, of course, EVs. Those tariffs have been increased from 25% to 100%, raising tensions between the two global superpowers.

As a response, China is threatening tariffs of its own with hopes the EU won’t opt for the same route the US took.

China poised to introduced tariffs as high as 25%

Per Automotive News Europe, the EU’s China Chamber of Commerce has been informed of the foreign nation’s threats of 25% tariffs from “insiders.” If enacted, the tariffs could significantly affect the businesses of US and EU automakers exporting ICE vehicles into China and would most certainly fuel international tensions that are already strained.

The threats from China have been tactful as we approach a deadline the country has given the EU to share the results of its probe on imported BEVs and unfair subsidies. Per reports, The EU has until early June to declare whether it also intends to impose tariffs on products from China, but the European Union doesn’t appear fazed by the threats. Eurasia Group analysts shared a note earlier this week:

China’s retaliatory trade investigations and warnings are not deterring the EU. Brussels is eager to send a strong signal to Beijing with its EV probe that the EU will counteract Chinese subsidies and overcapacity.

According to China’s Ministry of Commerce tariff page, the tariff on vehicles with engines larger than 2.5 liters imported from Europe is 15%. However, import tallies in that segment from 2023, World Trade Organization policies permit China to increase that number to a 25% fee on every large engine vehicle coming in.

To show it is serious, China has also alluded to the possibility of imposing additional tariffs on products coming over from Europe, including wine and dairy products.

As the largest producer of electric vehicles in the world, China has cause for concern about the current and looming threats of tariffs from its international trade partners. Trust that the global market has an eye on this situation, which could prove detrimental to the speed at which EV adoption grows worldwide.