Yahoo Finance EU Moves Ahead With Provisional Tariffs on China EV Imports
(Bloomberg) -- The European Union moved ahead with plans to impose provisional tariffs on electric vehicles imported from China that would raise rates to as high as 48%, a step likely to escalate trade tensions with Beijing.
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The EU confirmed Thursday that it would apply provisional duties on three Chinese manufacturers that were sampled for its anti-subsidy investigation. State-owned MG maker SAIC Motor Corp. faces a 37.6% tariff on top of the existing 10% rate, while Volvo Car AB parent Geely and BYD Co. will be hit with added charges of 19.9% and 17.4%, respectively.
Other EV producers in China that cooperated with the investigation but haven’t been sampled will be subject to a weighted average duty of 20.8%, while firms that didn’t cooperate will face a 37.6% top-up. Western carmakers such as Renault, BMW and Tesla are also affected, with the US manufacturer currently making up the bulk of EU-bound EV shipments from China.
The provisional duties will apply as of Friday, and definitive duties would kick in by November barring an alternative solution, or if a qualified majority of EU member states block the final move. The EU, which said that talks with China have intensified in recent weeks, concluded in its probe that China subsidizes its EV industry to a degree that causes economic harm to the bloc’s carmakers.
“Those talks with China are ongoing,” Valdis Dombrovskis, an executive vice president of the European Commission, said in a Bloomberg Television interview with Francine Lacqua. “Should a mutually beneficial solution emerge, we can also find ways then not to apply at the end of the day the definitive tariffs — but it’s very clear that this solution needs to resolve this market distortion we’re currently having.”
The EU move follows a US decision to impose a 100% duty on EVs from China, though shipments are currently close to zero. Canada last month said it’s weighing tariffs as well. While China has threatened to retaliate, the EU’s comparatively well-off consumers represent an important outlet for domestic EV makers battling overcapacity.
China has already launched a targeted anti-dumping probe on pork imports. The findings of an investigation into EU spirits are due early next year but could come anytime, based on what’s happened before. Beijing has warned it could hit European agricultural goods, aviation and cars with large engines. China could also decide to challenge the EU’s probe at the World Trade Organization.
“We are not seeing the basis for retaliation as what we are conducting is indeed in line with WTO rules,” Dombrovskis said.
Shares of Volvo Car fell as much as 8.9% on Thursday in Stockholm. The company plans to shift production of its best-selling all-electric model, the EX30 SUV, to Belgium from China next year, but will be subject to the new levies for now. It had no immediate comment.
The EU and China have been consulting on a way forward and the two sides plan to continue conversations over the next four months. Chinese EV makers are increasingly pushing into Europe, though their overall market share of electric-only sales is below 10% for now. MG, the former British brand that SAIC revived, has led the charge, followed by BYD and Nio Inc.
Nio, which sells the luxury ET7 sedan in Europe, said Thursday it may raise prices in the future because of the tariffs. Tesla last month added language to its order pages in Europe advising potential car buyers to take delivery of Model 3 sedans ahead of an expected increase in prices starting in July.
The automaker builds Model 3s in Shanghai and has asked to be subjected to a lower tariff rate than other manufacturers, arguing that it’s benefited from less substantial state support.
WTO Rules
For Brussels, any solution has to be grounded in WTO rules and address the underlying harmful subsidies the probe has identified. Beijing has looked to transform the investigation into a negotiation and has been trying to divide member states by pressuring them bilaterally, Bloomberg previously reported. Some, including Germany, have pushed for a negotiated compromise.
In talks between the two sides, China had asked the EU not to introduce the provisional measures at all — or to consider lower rates based on fewer criteria and then increase them in November if a solution can’t be found before definitive tariffs are due, according to people familiar with the matter.
Beijing has also asked whether the rates can be adjusted between now and November if the situation changes as talks continue, the people said. While tweaks are possible, the EU prefers to establish a common understanding of the facts before exploring a mutually agreed solution that adheres to WTO rules, they added.
Technical talks will resume in the coming days, the people said.
The provisional duties will be issued as “guarantees” and be collected only if and when definitive duties were imposed, the EU has said.
Zhejiang Geely Holding Group Co. and BYD declined to comment Thursday on the provisional tariffs going into effect. SAIC didn’t immediately respond to a request for comment.
The tariffs will likely cut imports from China by a quarter, amounting to a value of roughly $4 billion, according to an estimate by Moritz Schularick, president of Germany’s Kiel Institute for the World Economy.
Many European carmakers have opposed higher tariffs, including Mercedes-Benz Group AG and Volkswagen AG. China is the biggest market for Mercedes, VW and BMW AG.
Tariffs are a “dead end” and will harm European carmakers, while potentially slowing progress toward decarbonization, BMW CEO Oliver Zipse said in a statement.
--With assistance from James Mayger, Lyubov Pronina, Wilfried Eckl-Dorna, Felix Tam and Monica Raymunt.
(Updates with Volvo Car share move in ninth paragraph)
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