China filed an appeal with the World Trade Organization (WTO) over the E.U.’s tariffs on China’s electric vehicles (EVs), as bilateral talks between China and the bloc stagnate. Industry and political analysts have determined this appeal is a warning shot against the EU to show that China and its EV industrial complex are strong.
It is expected, however, that China’s reaction to the E.U.’s tariff on EVs will be somewhat measured. This is because China is looking to engage in closer economic relations, especially considering economic tensions are on the rise with the United States.
This has prompted China to sit down with the E.U. to discuss the situation.
EU imposed tariffs for China’s EVs came into effect on Wednesday, October 30
Since tariffs came into effect, both the E.U. and China have discussed the possibility of setting minimum price commitments from Chinese car manufacturers as a possible alternative for the tariffs that have already been set.
Europe is a crucial market for Chinese EV manufacturers, as in 2023 alone, the E.U. accounted for more than 40% of Chinese EV exports.
This will certainly motivate China to find common ground with the E.U. on the EV tariffs, making it extremely unlikely for relations between the bloc and the country to spiral out of control like Beijing and Washington relations. For context, the U.S. and China did not settle their dispute, and the United States announced 100% tariffs on Chinese EVs earlier this year.
China has urged France to push the European Commission toward a solution acceptable to both the European and Chinese electric vehicle industries, while France said the bloc would not yield on key matters as it pushes to overturn a tariff on brandy https://t.co/ZR9L7m0GU4 pic.twitter.com/RJqhl2yv3e
— Reuters (@Reuters) November 4, 2024
As of right now, the E.U. has raised its tariffs to 45.3% on China’s EVs, which subsequently led the Chinese government to target E.U. exports to China like pork, dairy and other products.
China is the EU’s most challenging trading partner
In an EU parliamentary committee earlier this week, the European Commission’s vice-president, Maros Sefcovic, said that China is the E.U.’s “most challenging trading partner” and that the E.U. needs to be “more assertive in challenging China’s structural imbalances and unfair practices.”
He also made it clear that the E.U. is not interested in engaging in “trade wars” but instead is seeking to “rebalance” its relationship with China in areas where “it’s not fair.” This is the thought process behind the tariff mechanism the E.U. has set on China’s EVs.
This resolutive position is seemingly not being shared by the Chinese auto industry. Head of China Autos at Macquarie Capital, Eugene Hsiao said, “China will seek every possible avenue to pressure the E.U. into lowering tariffs.”
He added, “If a lower tariff is agreed upon, this could impact the level of investment Chinese EV makers would look to place into local production in the E.U.”
Major media outlets have also reported that China has asked its car manufacturers to stop substantial investments like building factories in E.U. countries that support the tariffs on China’s EVs and instead invest in those that were against the measure.
It remains to be seen whether China will be successful in pressuring the E.U. into lowering its tariffs for China’s EVs or if the measure will stand.
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