The EU has been imposing provisional countervailing duties on imports of electric cars from China since July 5. US tariff increases on Chinese products will follow from August.
Unlawful subsidies jeopardize the competitiveness of European companies - nine months after the initiation of an anti-subsidy investigation, provisional countervailing duties were therefore imposed on imports of battery-powered vehicles from China into the EU. Under Section 301 of the US Trade Act, the US also came to the conclusion that China's trade practices were unduly restricting the US economy. From August 2024, the US will therefore impose higher additional tariffs on originating goods from China. This affects certain strategic sectors such as steel and aluminum, semiconductors, electric vehicles, batteries, critical minerals, solar cells, cranes, and medical products.
With the publication of the Commission Implementing Regulation (EU) 2024/1866
of the EU Commission in the Official Journal of the EU on July 4, 2024, the announced countervailing duties came into force on the following day. These were well prepared:
The anti-dumping investigation covered battery-powered electric vehicles with the product code 87038010 imported from China to Europe from October 1, 2022 to September 30, 2023.
In a press release from 12 June 2024 , the EU Commission has already published the results of the samples examined from the various manufacturers and quantified the expected amount of countervailing duties depending on the Chinese manufacturer. Following a consultation with the Chinese government and the comments of interested parties, the provisional duties were revised slightly downwards and also published as an overview in a European Commission press release from 4 July 2024 :
The TARIC additional codes for the individual companies are reported in the import declarations. These can be found directly in Article 1 or the Annex to the Implementing Regulation.
The provisional duties have been valid for a maximum of four months since July 5, 2024. A decision on definitive duties must be taken in the EU within this period. Following the adoption of a joint decision, the duties are valid for five years. They will also apply retroactively once the procedure has been completed.
The EU is thus taking a much more moderate course than the US government. The latter had announced numerous punitive tariffs on goods of Chinese origin from August 1, 2024 - electric vehicles from China are to be subject to a tariff of 100% when imported into the USA.
Trade Representative Katherine Tai has recommended tariff increases on Chinese products. A publication of the Office of the United States Trade Representative provides an insight into the results of the investigation as well as the planned tariff rates, the affected product groups and the next steps. Among other things, steel and aluminum products, lithium-ion batteries for electric vehicles, or critical minerals are to be subject to a duty rate of 25%, electric vehicles from China even to a duty rate of 100%. Some increases will not come into force until January 1, 2025 or 2026, e.g. for semiconductors, permanent magnets, or natural graphite.
The Chinese Chamber of Commerce for the EU informs about the initiation of an investigation into anti-dumping measures on pork and pork products from Europe. Spain would be particularly affected as it is the most important supplier of pork to the People's Republic. But farmers in Lower Saxony are also already sounding the alarm. “No pork is currently going directly from Germany to China, so the effects would only be indirect,” says Jörn Ehlers, Vice President of the Lower Saxony Farmers' Association Landvolk Niedersachsen, to the German Press Agency. However, pork products, which European consumers consume less frequently, are processed in Spain.
The Chinese Ministry of Commerce has been scrutinizing brandy imports from the EU since January 2024. The proceedings are expected to be concluded at the beginning of 2025.
In addition to the initiation of anti-dumping proceedings on the Chinese side, the affected manufacturers of electric cars are also looking for ways to circumvent additional tariffs. One idea is to relocate production facilities. At the beginning of July, BYD signed an agreement to build an e-car factory in Turkey. According to a press release, this is set to go into operation as early as 2026. The aim is to produce 150,000 electric and plug-in hybrid cars. The EU's customs union with Turkey could give BYD duty-free access to two markets: To the EU market and the market in Turkey itself, which currently also imposes tariffs of 40% on Chinese e-cars. Models from car manufacturer Volvo, which belongs to the Chinese Geely Group, are now also to be increasingly produced in Belgium. This was announced by the Chinese Chamber of Commerce for the EU on X.
One of the strategies of Chinese companies is to develop Mexico as a production location. The free trade agreement between Canada, the USA and Mexico would allow e-cars to be imported into the USA duty-free. And even if the rules of origin are not complied with, the most-favored-nation clause could apply for the most part and a 2.5 percent tariff could come into effect.
Whether such strategies will defuse an escalation remains to be seen.
