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EU to Vote on Tariff Hike for Chinese EVs as Germany Fears Retaliation

Chinese cars ready for export. (Photo: barrons.com/)

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By Yang Letian

October 4, 2024
4:54 pm
Los Angeles, CA

Vienna —The European Union is set to vote Friday on a massive tariff increase on Chinese electric vehicles that Germany fears could spark a trade war with Beijing. Reuters reported Wednesday that the measure already has enough votes to pass, with support from France, Greece, Italy and Poland, whose populations make up 39% of the EU. At least 65% of the EU’s population must vote against the tariff plan to stop it. Regardless, analysts say, continued negotiations will be needed on China’s subsidies to its EV industry. On Wednesday, French President Emmanuel Macron in Berlin called Chinese subsidies “unbearable.” German Chancellor Olaf Scholz on Wednesday said talks with China must continue, and he indicated Germany might abstain from the vote. “More trade with more partners from more countries —

Vienna —The European Union is set to vote Friday on a massive tariff increase on Chinese electric vehicles that Germany fears could spark a trade war with Beijing.

Reuters reported Wednesday that the measure already has enough votes to pass, with support from France, Greece, Italy and Poland, whose populations make up 39% of the EU. At least 65% of the EU’s population must vote against the tariff plan to stop it.

Regardless, analysts say, continued negotiations will be needed on China’s subsidies to its EV industry.

On Wednesday, French President Emmanuel Macron in Berlin called Chinese subsidies “unbearable.”

German Chancellor Olaf Scholz on Wednesday said talks with China must continue, and he indicated Germany might abstain from the vote.

“More trade with more partners from more countries — that’s what sensible risk management looks like in an uncertain world,” Scholz said, as reported by Reuters.

“That’s why negotiations with China on electric vehicles must continue and why we must finally tackle the areas where cheap Chinese imports are harming our economy, for example steel,” he said.

Bloomberg reported that Germany expected a significant number of EU states to abstain from voting on the tariffs.

German automakers are against tariffs, fearing that retaliation from Beijing could impact access to China, their largest market.

German Finance Minister Christian Lindner said Wednesday “A trade war with China would do us more harm than good for a key European industry and a crucial sector in Germany.”

If the vote passes, it could see tariffs on Chinese EVs as high as 45%.

Beijing has hinted that it could retaliate with tariffs on German and Italian vehicles and on European agricultural products such as dairy, pork and French brandy.

Chinese Commerce Minister Wang Wentao visited Europe in late September and met with officials and businesspeople in charge of foreign trade and commerce in the EU, Belgium, Germany, Italy and other auto-manufacturing countries to lobby the EU to abandon the tariffs.

During the negotiations, the Chinese side proposed to set a minimum import price, but the European side refused.

The vote was pushed from September 25 to Friday to allow time for more consultation between the two sides.

Analysts believe the EU may make some compromises due to the complex interests within the EU.

Ja Ian Chong, associate professor of political science at the National University of Singapore, told VOA, “Because the EU is made up of many national entities with cross-cutting interests, these may lead to the vetoing of tougher action, much the same way ASEAN (the Association of Southeast Asian Nations) is ineffective in the face of PRC (People’s Republic of China) pressure.”

Spanish Prime Minister Pedro Sánchez said during a visit to Beijing in early September that he would urge the European Commission to reconsider raising tariffs on China’s EVs.

Francesco Sisci, an Italian Sinologist, told VOA that the centrifugal forces of member states and political parties within the EU are too strong to make difficult decisions.

In the past, the EU “was ruled by a solid majority centered around People’s parties and Social-Democratic parties and a triangle made of Germany, France and Italy, Sisci said. “Both these two architectures are now partially shattered.”

“The People’s parties and Social-Democratic parties have still a majority but a thin one,” he said. “Italy, with a right leaning government, didn’t vote for the present President of the commission, Ursula von der Leyen, and it is dragging its feet on many EU policies.”

“Germany and France have governments at home that are under siege from new rightist parties,” he added.

Sisci told VOA Mandarin that Germany’s car industry “is dependent on the sales in the Chinese market and yet risks being squeezed out of all markets because of the Chinese EV competition. There are no good or clear alternatives.”

Although China’s EVs have a price advantage in the European market, Chinese businesspeople working in the automotive industry there are more cautious.

Yang is a Chinese businessman in Austria who does automobile maintenance, annual inspection and second-hand car trading. He did not give his full name because of privacy concerns.

Yang said that because of Europe’s economic downturn, consumers there are careful with their money and will not easily replace their gasoline-powered vehicles with all-electric vehicles.

“Many European consumers choose hybrid electric vehicles,” Yang said, talking about his own business. “This year’s data report shows that the sales of all-electric vehicles have decreased by one-third, while hybrid electric vehicles have increased.”

He said tariffs will certainly affect the price of Chinese electric vehicles in Europe, but European consumers are more concerned about other factors such as the life and endurance of the car.

“All-electric vehicles may not be a big market in Europe,” he said.

The EU’s vote comes after a probe into China’s subsidies for the industry and 100% tariff hikes on Chinese EV imports to the U.S. and Canada.

Adrianna Zhang contributed to this report.

Source: VOAnews