EU and US tariffs on Chinese Electric Vehicles will trigger WTO complaint

June 17, 2024: The European Commission has provisionally concluded after an initial investigation  that the battery electric vehicles (BEV) sector in China benefits from unfair subsidies, threatening economic injury to EU BEV producers. On June 12 it announced additional tariffs of up to 38.1 percent on some China-made electric vehicles from July to safeguard industries and jobs inside the European bloc. 

By comparison, the EU currently charges a 10 percent tariff on all car imports. The Biden administration also recently announced a 100 percent tariff on Chinese BEVs. Both countries are themselves providing various tax incentives and subsidies to industries involved in the transition to a low carbon economy, through the EU’s Green Deal and the US Inflation Reduction Act.

The EU Commission decision appears to align with US strategic decisions to isolate China, rather than World Trade Organisation (WTO) rules. 

He Yadong, spokesperson for the Chinese Ministry of Commerce, said on June 13, that the EU's actions violate WTO rules and that “China reserves the right to sue the EU at the WTO and will take all necessary measures to defend our domestic companies' legitimate rights."

German automakers including Mercedes-Benz, BMW and Volkswagen criticized the EU decision, as some of them produce their brands in China. Carl Bildt, co-chair of the European Council on Foreign Relations and a former Swedish prime minister, has commented that  the US and Eu moves are a dangerous retreat into protectionism.

The US Tesla company makes BEVs in China and has asked for a tariff specific to its circumstances, but has advised European buyers to place orders for its model 3 in June because the price will rise in July.

Most Chinese BEVs are still produced for the domestic market rather than export. China’s exports of BEVs to the EU accounted for only about 5 percent of China’s BEV production in 2023 according to the Chinese Chamber of Commerce to the EU. But the EU and US fear future expansion of cheaper Chinese exports.

The US and EU tariffs show the challenges facing WTO rules in the face of the need for active industry policies to address climate change and the realities of increased geopolitical tensions.