In a move to counter the European Union’s recent decision to impose tariffs on Chinese electric vehicle (EV) exports, Chinese automakers have called upon Beijing to retaliate by raising tariffs on imported European gasoline-powered cars. According to a report by the state-backed Global Times newspaper, this demand was made during a closed-door meeting on Tuesday attended by Chinese automakers and European car companies.
The meeting, organised by China’s Ministry of Commerce, saw the Chinese auto industry “call on the government to adopt firm countermeasures and suggest that positive consideration be given to raising the provisional tariff on gasoline cars with large-displacement engines,” the report stated. Attendees included Chinese automakers such as SAIC and BYD, as well as European giants like BMW, Volkswagen (including Porsche), Mercedes-Benz, Stellantis, and Renault.
The primary aim of the meeting was to exert pressure on Europe and lobby against the tariffs announced by the European Commission last week, which were designed to shield the EU’s car industry from Chinese competition. Industry insiders suggest that both Europe and China have reasons to strike a deal in the coming months to de-escalate tensions and avoid the addition of billions of dollars in new costs for Chinese EV makers, as the EU process allows for review.
The European Commission’s decision to impose anti-subsidy duties of up to 38.1% on imported Chinese EVs from July follows a similar move by the United States to hike tariffs on Chinese cars in May, opening a new front in the West’s trade war with Beijing.
While the EU has expressed willingness to discuss a mutually agreeable solution, the situation highlights the growing trade tensions between China and the West. The EU’s protective trade policy aims to address concerns about China’s production-focused, debt-driven development model potentially flooding the bloc with cheap goods, including electric vehicles, as Chinese firms seek to boost overseas sales due to weak domestic demand.
Experts have weighed in on the issue, with some criticising the tariff war as unfair, given China’s efforts to address overcapacity issues and boost domestic demand for new energy vehicles. Others have hinted at potential retaliatory measures from China, such as initiating anti-dumping investigations into European pork and dairy products.
The proposed tariff increase on imported gasoline sedans and sport utility vehicles with engines larger than 2.5 litres from the current 15% to 25% could significantly impact European automakers, who exported over 196,000 such vehicles to China in 2023. Germany, as the largest exporter of these vehicles to China, could face considerable consequences, along with other major exporters like Slovakia, the United States, the United Kingdom, and Japan.
As tensions escalate between China and the West over trade and economic issues, the potential for further retaliatory measures and tariff hikes looms, raising concerns about the potential impact on global trade and the automotive industry.