The European Union (EU) has approved a new set of tariffs on battery electric vehicles (BEVs) imported from China, with rates ranging from 7.8 percent to as high as 35 percent for some automakers. The decision comes after a vote where 10 countries favored the tariffs, five opposed, and 12 abstained. The tariffs are set to take effect by October 31.
France and Italy, both home to significant automotive industries facing increasing competition from Chinese BEVs, were among the nations supporting the tariffs. Other supporters included Poland and the three Baltic States. The move is seen as a response to the growing presence of affordable Chinese electric vehicles in the European market, which has raised concerns among European automakers about maintaining their market share.
The EU’s justification for the tariffs is based on a newly established concept of state aid called the Foreign Subsidy Regulation (FSR). Unlike measures initiated through the World Trade Organization (WTO), the FSR is a unilateral framework developed by the EU to address foreign subsidies that may distort the internal market. The regulation targets subsidies provided by non-EU governments to companies active in the EU.
Under WTO rules, export-related state subsidies are prohibited, and Chinese BEVs exported to Europe comply with these regulations, as they do not receive such subsidies. However, the FSR focuses on pre-production subsidies, such as those related to research and development or the establishment of manufacturing facilities. Chinese local governments often offer incentives to attract electric vehicle manufacturers to their regions—a practice that is common in many countries, including the United States.
Critics of the EU’s move argue that the FSR is tailored to limit competition from Chinese automakers, effectively protecting European legacy internal combustion engine (ICE) manufacturers who are struggling to keep pace with the rapid advancement and affordability of Chinese electric vehicles. They point out that similar government support has been provided within the EU, such as the substantial funding invested in the Airbus development program to compete with American aerospace company Boeing.
The introduction of these tariffs could have significant implications for the global electric vehicle industry and international trade relations. European consumers might face higher prices for electric vehicles, potentially slowing the adoption of green technology. The decision also raises questions about the balance between protecting domestic industries and fostering fair competition in the global market.
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EU invents new foreign subsidy rule to slap tariffs on Chinese EVs
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