The Great Electric Car Tax Gambit: China’s Opening Move

13 August, 2024

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In a recent development, Beijing has filed a complaint with the World Trade Organization (WTO) against the European Union’s (EU) tariffs on Chinese electric vehicle exporters, as trade tensions escalate.

Earlier in June, the European Commission announced it would significantly increase tariffs on Chinese-made electric vehicles following a months-long investigation that found Beijing providing unfair subsidies to its automotive industry.

This measure is currently awaiting a vote by EU member states in November. The EU’s trade director, Valdis Dombrovskis, expressed his expectation that the tariffs would be approved.

The tariffs will vary between the largest companies, such as Geely and BYD, giants in the electric vehicle industry, and could reach nearly 50% for automakers deemed uncooperative with the EU’s investigation.

In its complaint to the WTO on August 9, China’s Ministry of Commerce argued that the EU’s findings severely violated WTO rules and undermined global cooperation on climate change. They urged the EU to immediately rectify its wrongdoings and protect economic and trade cooperation as well as the stability of the electric vehicle industry.

The European Commission stated that they are carefully examining the details of China’s complaint and will respond to the Chinese government at an appropriate time following WTO procedures.

“We are confident in the WTO compatibility of our investigative measures,” Dombrovskis defended the tariffs, arguing that they are not prohibited.

China’s complaint to the WTO marks the latest move in a series of retaliatory actions against Europe’s growing protectionism. Some Chinese trade experts have warned Beijing against stronger measures that could harm the world’s second-largest economy, which is already struggling with slower growth.

In January, China launched an anti-dumping investigation into imported French cognac, a move seen as a punishment for France’s support of the electric vehicle investigation.

By mid-June, less than a week after the EU announced tariffs on electric vehicle shipments from China, Beijing initiated an anti-dumping investigation into imported pork from the EU, a move expected to impact farmers in Spain, the Netherlands, Denmark, Germany, and Belgium.

This year, Europe has also launched trade investigations into wind turbine and solar energy manufacturers and imposed anti-dumping measures on imported Chinese biofuels. These measures will come into force this week.

According to FT