The European Union is poised to inform China of its intentions to levy tariffs on imports of electric vehicles this week, marking the commencement of a potential trade dispute with Beijing.
A formal notification of tariffs could materialize as early as Wednesday, following an extensive investigation into China’s state subsidies for its automotive industry.
The investigation is expected to affirm significant support directed towards the electric vehicle (EV) sector.
Chinese manufacturers are preparing for the imposition of new import duties, while analysts anticipate retaliatory measures from Beijing, potentially affecting various EU exports to China, ranging from cognac to dairy products.
Following a recent meeting with Chinese President Xi Jinping in Paris, European Commission President Ursula von der Leyen cautioned against China’s surplus production, affirming the EU’s commitment to safeguarding its industries and jobs.
The investigation into Chinese state subsidies, initiated last October, stemmed from concerns about China flooding the EU market with inexpensive EVs due to overcapacity and subdued domestic demand.
This investigation is one of several inquiries by the EU into Chinese state aid, encompassing exports of solar panels, heat pumps, and wind turbines, which the energy sector claims undercut EU markets by 50%.
Experts anticipate Beijing viewing the imposition of tariffs as a demonstration of strength, particularly as the electric car sector drives China’s export success.
President Xi is expected to maintain his commitment to dominating the global green technology sector through EVs, solar panels, and electric vehicle batteries.
Upon the anticipated conclusion of the EU investigation, Chinese car manufacturers will receive a formal pre-notification of tariffs, with a four-week window to refute the European case.
The decision to permanently apply tariffs requires backing from EU member states, expected around 13 months after the investigation’s launch.
If implemented, the tariff structure would entail three tiers: individual rates for companies investigated by the EU, an average tariff for cooperating companies not fully investigated, and a residual tariff for those not investigated at all.
Consultancy firm Rhodium Group forecasts tariffs in the range of 15%-30%, which could be absorbed by major players like BYD. Rhodium suggests that even higher duties would be necessary to deter Chinese EV exporters from the European market.
China contends that it does not subsidize its automotive sector and argues that its exports aid Western countries in meeting their environmental goals.
During a recent visit to Spain and Portugal, Chinese Commerce Minister Wang Wentao advocated for cooperation with the EU, urging Europe to abandon protectionism and prioritize dialogue and collaboration.
While Western governments believe China can adjust its strategy to compete fairly, they are adamant about preventing Chinese dominance in the future clean energy and technology markets.
European officials are keen to avoid repeating past energy-related mistakes and are pursuing a strategy to mitigate risks associated with reliance on Chinese imports.
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