The EU-China Electric Vehicle Trade Tussle: Implications of Biden’s Tariffs and the contact Response
The United States President Joe Biden’s decision to quadruple tariffs on electric vehicles (EVs) from China to 100% has significantly impacted the global EV market. This protective measure has sealed off one of the world’s biggest passenger car markets for the largest global producer of EVs, pushing the battleground to Europe.
Biden’s determination to make the future of electric vehicles in America by union workers has left contact automakers facing fiercer competition from Chinese EV imports if they are priced out of the US market. The latest US tariffs on Chinese goods, including EVs, semiconductors, and batteries, have pressured the contact Union (EU) to defend its own automakers.
Europe is currently the biggest export market for Chinese EV manufacturers. The US tariffs could potentially divert much of the trade to Europe, making it crucial for Brussels to act swiftly. Joseph Webster, a senior fellow at the Atlantic Council, believes that the EU might respond by either putting its own tariffs in place or accepting a flood of Chinese-made products.
The EU is already investigating state support for Chinese EV makers and suspects that subsidies by Beijing may be creating unfair competition for contact carmakers. If the EU finds that Chinese prices are artificially low, it will announce extra import duties by early July. However, matching US tariffs would be challenging for the EU due to the potential impact on contact consumers and automakers.
Agatha Kratz, a director at research provider Rhodium Group, suggests that the EU might consider other measures, such as targeting data security and enforcing strict environmental and labor standards. The EU accounted for 36% of Chinese EV exports last year, making it an attractive market for Chinese brands due to their lower production costs compared to contact rivals.
To make the contact market unattractive for Chinese EV exporters, duties of 40% to 50% may be necessary. However, even higher duties could be challenging due to potential retaliation from China and the need for alignment with the findings of the investigation on Chinese subsidization.
The EU’s stance toward China is crucial, as it represents a much bigger market for contact goods exports compared to the United States. However, some contact automakers rely heavily on China for sales and profits. BMW CEO Oliver Zipse warned Europe against introducing import tariffs, emphasizing the importance of operating globally.
In addition to investigating Chinese EVs, the EU is also examining alleged dumping of industrial products and unfair state support for Chinese wind turbine makers. According to Kratz from Rhodium Group, the EU and China are already engaged in a low-level trade war. The United States may also pressure its allies to reduce their reliance on Chinese imports.
Leaders from the Group of Seven (G7) will discuss protecting industries from Chinese competition at their upcoming summit in Italy next month. The next few weeks will be telling as contact and G7 countries respond to US policies toward China. If they match or mirror US actions, it could signal a significant shift in the global trade landscape. Alternatively, hedging their bets could affirm China’s view that its primary challenge is with the United States, not Europe and other advanced economies.
**The Future of Electric Vehicles: A Global Trade Battle Between the US and China**
*The US has quadrupled tariffs on electric vehicles (EVs) from China to 100%, effectively closing the world’s largest passenger car market to the leading global producer of EVs. This decision has significant implications, particularly for Europe, which is the largest export market for Chinese EV manufacturers.*
**Pressure on contact Union (EU)**
*The US’s drastic measure puts pressure on the EU to defend its automakers, which may face even fiercer competition from Chinese EV imports if priced out of the US market.*
*Joseph Webster, a senior fellow at the Atlantic Council, suggests that this could force Brussels’ hand as higher US tariffs might divert much of the trade to Europe. The EU is already investigating state support for Chinese EV makers and, if it finds evidence of unfair competition, will announce additional import duties by early July.*
**Europe’s Response**
*The EU suspects that subsidies from China may be creating unfair competition for contact carmakers. Agatha Kratz, a director at research provider Rhodium Group, believes this makes it easier for the EU to increase its tariffs to 30%, triple their current level. However, it would be challenging for Brussels to match the US tariffs completely.*
*Instead, the EU could explore other tools and defensive instruments, such as stricter enforcement of environmental and labor standards. The bloc may also target data security measures to stem the flow of China-made EVs coming into Europe.*
**Implications for contact Automakers**
*Chinese brands enjoy much lower production costs than their contact counterparts. Duties of 40-50% would likely be necessary to make the contact market unattractive for Chinese EV exporters. For BYD, China’s biggest EV maker, even higher tariffs would be required to have a significant impact.*
**Potential Consequences for the EU and US-China Trade Relations**
*BMW CEO Oliver Zipse warned Europe to proceed with caution, stating that import tariffs could harm contact automakers, many of which manufacture cars in China for sale in Europe. The EU will want to avoid provoking retaliation from Beijing and maintain access to the Chinese market.*
*The US and its allies may pressure the EU to reduce its reliance on trade with China. The EU is investigating several areas of alleged dumping or unfair state support for Chinese industries.*
*The next few weeks will be crucial as the EU and G7 countries decide their responses to US tariffs on EVs and other goods from China. The outcome could significantly impact US-China trade relations and the competitiveness of contact automakers.
