The European Union took the next step on Thursday toward collecting new tariffs on Chinese electric cars, telling automakers to get guarantees from banks that they will be able to pay the levies set to become final in October.
The move was expected. The bloc had said on June 12 that it would impose additional tariffs of 17 to 38 percent on electric vehicles imported from China. An investigation by the European Union had found what officials in Brussels described as unfair subsidies by the Chinese government to electric car makers.
The Chinese government has denied that it subsidizes the industry. Beijing claims that low prices for electric cars made in China reflect strong competition and innovation.
The two sides began talks on June 22 in an attempt to resolve the dispute. “We are continuing to engage intensively with China for a mutually acceptable solution,” said Valdis Dombrovskis, the EU’s trade commissioner.
The imposition of temporary tariffs requires car manufacturers to offer European countries financial guarantees for eventual payment, although they do not have to send any money yet.
The provisional tariffs vary significantly by automaker based on European Union estimates of the extent of government subsidies to each Chinese manufacturer. Higher tariffs are being imposed on manufacturers that disclosed little about their subsidies, including a 37.6 percent tariff on SAIC Motor. Lower tariffs apply to BYD, at 17.4 percent, and Geely, at 19.9 percent.
Carmakers will have to guarantee they will be able to make the payment for vehicles arriving in the European Union starting Friday, for a period running until October. However, the bloc has yet to determine in the coming months whether subsidies to Chinese cars have caused significant damage to the European car market.
Concerns are spreading among governments around the world that China is looking to export its way out of economic difficulties as a housing market crash has made Chinese households less willing to spend. In May, President Biden quadrupled US tariffs on Chinese electric vehicles, to 100 percent.
Turkey imposed additional tariffs of 40 percent last month on gasoline and hybrid electric cars imported from China. Turkey had already imposed additional tariffs last year on China’s electric cars. On Tuesday, Canada launched a trade investigation that could also lead to tariffs on electric cars from China.
Brazil is gradually raising tariffs on electric cars imported from every country starting this month, following a surge in imports from China earlier this year.
China has threatened to retaliate against the European Union. Its trade ministry said on June 17 it had opened an investigation into whether pork from the European Union was being dumped into China at unfairly low prices. The case could result in charges for dozens of products, from pork chops to pickled pork intestines.
In January, the commerce ministry launched a trade case against imports of cognac and other European wine-based spirits that come mainly from France. The French government has been an early supporter of tariffs on electric cars from China.
China’s auto industry has suggested the ministry impose tariffs on large gasoline cars imported from the European Union if the bloc imposes tariffs on electric cars. China has a 40 percent sales tax on cars and sport utility vehicles with very large gasoline engines, almost all of which are imported from North America or Europe.
China also has a basic tariff of 15 percent on imported cars. Europe has a base rate on cars of 10 percent and the United States has a rate of 2.5 percent. The various fees now being designed or imposed are in addition to these basic fees.
China is reverting to the playbook it followed during its last major trade dispute with the European Union, in 2013 over China’s low-priced shipments of solar panels to Europe. At the time, Beijing persuaded Germany to lead a coalition of EU member states that blocked tariffs on solar panels.
But it may be more difficult for China to stop tariffs on electric vehicles. Europe’s solar industry collapsed a decade ago after the union scrapped its tariffs. Few in Europe want electric car production to suffer a similar fate.
The European Union has also tightened its rules for countries to reverse tariffs. China would have to win over a majority of member countries in a final vote in October, and those countries would have to represent at least 65 percent of the bloc’s population.
Member states will also hold a preliminary vote within two weeks on whether they support the temporary tariffs. But the vote is not binding on the European Commission, the bloc’s executive body.
Chinese automakers have begun building factories in Europe to meet demand and avoid tariffs, following a strategy pioneered by Japanese manufacturers to circumvent trade restrictions in the United States. “It’s like what Toyota did in the 1980s,” said John Zeng, an analyst at GlobalData Automotive.
But China has a surplus of auto factories at home, with the capacity to build twice as many cars as are sold in China, which is the world’s largest car market.
The trade case has produced a split in Europe’s car industry. German carmakers have opposed the tariffs. They face steep sales declines in China as Chinese automakers have gained market share at their expense. So German car manufacturers are exporting more and more from their factories to China, including Europe.
But auto parts makers in Europe have tended to favor the imposition of tariffs, as major automakers such as Volkswagen increasingly assemble cars from parts made by Chinese companies.