EC's misguided EV tariffs: A blow to progress and partnership

Editor's note: Adriel Kasonta, a special commentator for CGTN, is a London-based foreign affairs analyst and commentator. He is the founder of AK Consultancy and former chairman of the International Affairs Committee at Bow Group, the oldest conservative think tank in the UK. The article reflects the author's opinions and not necessarily the views of CGTN.

In a controversial move, the European Commission has decided to raise tariffs on electric vehicles imported from China. Following an investigation into alleged distortive subsidies provided by the Beijing government, the EU's executive arm has added tariffs ranging from 17.4 percent to 38.1 percent on top of the standard 10 percent duty on imported EVs. This decision, set to take effect in July unless China addresses these so-called unfair practices, raises significant concerns about its potential impact on both the European and global automotive markets.

A politically charged decision

The European Commission initiated this probe without a formal complaint from the EU's automotive industry, basing its investigation on a potential threat of future disruption. This preemptive strike appears to be politically motivated, with European Commission President Ursula von der Leyen leveraging the China subsidy probe as a critical element of her re-election campaign. Announced during her State of the Union speech, this move mirrors Washington, D.C.'s strategy of "de-risking" from Beijing, highlighting a growing trend of economic nationalism and isolationism.

The White House has openly urged the EU to move in this direction, with U.S. Treasury Secretary Janet Yellen encouraging the bloc during her last visit to Germany in May to follow America's lead in protecting itself from China's "industrial overcapacity."

However, this alignment with U.S. policy overlooks the European automotive sector realities that differ from those across the pond. The U.S. currently receives just 1.1 percent of China's EV exports as opposed to 36 percent for the EU.

European automotive leaders have expressed strong opposition to the tariff increases. Ola Källenius, CEO of Mercedes-Benz, and BMW's CEO Oliver Zipse have both argued against the need for protective tariffs. Källenius stated that tariffs should be reduced to foster competition and innovation, while Zipse warned that the Commission's decision harms European companies and interests. This sentiment is echoed by Cui Dongshu, Secretary General of the China Passenger Car Association, who believes the tariffs will have minimal impact on Chinese firms.

Despite political assertions of overcapacity, the European automotive sector does not seem to share this concern. Instead, industry leaders emphasize the need for competition to drive better vehicle production, highlighting the disconnect between political rhetoric and industry realities.

The economic impact of these tariffs on EU importers of Chinese EVs is substantial. Every additional 10 percent tariff costs EU importers approximately $1 billion, exacerbating the challenges faced by a sector already struggling with slowing demand and falling prices. With the value of EU imports of Chinese EVs skyrocketing from $1.6 billion in 2020 to $11.5 billion in 2023, these tariffs threaten to derail the progress made in the transition to electric vehicles.

Moreover, these tariffs are likely to result in higher prices for European consumers. Production, energy, and labor costs in Europe are significantly higher than in China, and the tariffs will only exacerbate these differences. Chinese brands may circumvent these tariffs by establishing manufacturing plants in EU countries, as BYD has already announced plans to do in Hungary. However, this will take time and investment, delaying the benefits of increased competition and innovation.

Environmental implications

The EU's Green Deal aims to reduce greenhouse gas emissions by at least 55 percent by 2030, with transport playing a crucial role in achieving this goal. Cutting China's EV sales in Europe undermines this objective, as European production alone cannot meet the demand for EVs. China's 30 percent efficiency advantage over Europe in EV production is critical for the bloc's plan to phase out gasoline and diesel vehicles by 2035.

By imposing these tariffs, the European Commission risks hampering its own environmental goals, illustrating the unintended consequences of protectionist policies. 

A reduction in the availability of affordable EVs could slow the transition to cleaner transport, jeopardizing the EU's climate ambitions.

The path forward

The European Commission's decision to raise tariffs on Chinese EVs is fraught with economic, environmental, and geopolitical risks. Rather than fostering competition and innovation, these tariffs are likely to harm European consumers, undermine climate goals, and provoke retaliatory measures from China. A more strategic approach is needed, one that balances the need for industrial autonomy with the realities of global trade and environmental imperatives.

Brussels must seek a resolution that addresses legitimate concerns about subsidies without resorting to protectionist measures that could backfire. Engaging in constructive dialogue with Beijing and aligning policies with the broader goals of the Green Deal and global trade rules will be crucial. By doing so, the EU can avoid the pitfalls of a politically motivated decision and safeguard its economic and environmental future.

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