EU imposes 38% tariffs on Chinese electric vehicles in response to unfair trade practices

On Thursday, July 4, the European Union demonstrated its commitment to fair trade by imposing additional tariffs of up to 37.6% on electric vehicles from China, citing concerns that the duties could impact the domestic market due to unfair government subsidies. The EU took this action even after Beijing warned of the negative consequences that the measure could bring, including a possible trade war.

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The news comes after the European Commission officially announced the tariffs, adding that they would be implemented on Friday, July 5.

The European Commission’s strategic approach to this issue is illustrated by its decision to start investigating the impacts of Chinese imports of electric vehicles last year. The investigation led the Commission to a provisional conclusion that public subsidies to Chinese electric vehicle manufacturers have harmed their European competitors in their transition from combustion to electric power.

There is, however, a four-month window during which the tariffs are provisional and open to further discussions between the EU and China. After four months, when the investigation is complete, the Commission will propose definitive duties applicable for five years, in complete confidentiality with the 27 members.

Tariffs on Chinese imports of electric vehicles are currently 10%, but have been increased to 38% in response to worsening unfair trade relations between the European Union and China. According to European Commission President Ursula von der Leyen, the tariffs are aimed at protecting the growing influx of cheap electric vehicles manufactured with state subsidies.

Looking at the possible broader impacts, these tariffs will likely slow down the consumption of Chinese electric vehicles in the EU, leading to an expected slowdown in Chinese electric vehicle production, which will reduce the use of aluminum, a key metal used in the manufacturing of electric vehicles for lightweighting reasons. According to AL Circle’s report “The Future of Aluminum in the Transport Sector – A Sector Analysis with Forecasts to 2027,” the EU has planned to phase out internal combustion engine vehicles by 2035, and many countries and regions are expected to follow suit.