The News
The European Union on Friday voted to impose a new tariff of up to 35% on Chinese electric vehicles, heightening trade tensions between Brussels and Beijing.
The tariffs had been the source of significant internal friction among the EU’s member states, with Germany and its vulnerable automobile industry vehemently opposed to further measures.
EU diplomats said 10 countries including France and Italy supported slapping tariffs of up to 35.3%, in addition to the current 10%, AFP reported. Five countries, including Germany and Hungary, voted against, and 12 abstained.
Brussels last reviewed its tariff rate in September, imposing levels from 7.8% to 35.3% on electric cars depending on whether the manufacturer had cooperated with its anti-subsidy investigation.
SIGNALS
Brussels — not Berlin — now has leverage over EU’s China policy
Former German Chancellor Angela Merkel for years largely dictated the EU’s stance on China, often acquiescing to Beijing’s trade policies on 5G technology or solar panels, for example. But under current Chancellor Olaf Scholz, “Germany is being forced to swallow” Brussels-dictated China policy, according to the German Marshall Fund. And Brussels currently seems to have the upper hand in the trade spat with Beijing: By opening the door to continued negotiations after the duties are in place, wavering states like Spain can either back or abstain from the vote with reassurance that a future deal is still possible. That makes the passage of these latest tariffs much more likely, and “leverage in negotiations with Beijing will only rise.”
Impact could go beyond trade retaliations
Beijing is already threatening potential retaliatory tariffs on EU goods like pork and brandy in response to the EV levies. But the bigger consequence is on climate cooperation with “China and the EU [facing] a bumpy road ahead,” a Greenpeace adviser wrote for Dialogue Earth. The EU’s tariff approach to a net-zero transition — pushing for EU green businesses while reducing the roles of Chinese ones — could mean blocking globalization and multilateralism, which are “core tenets of climate cooperation as we know it,” the adviser wrote. Pressing issues like the phasing out of fossil-fuel would be muted, she added, because the Brussels-Beijing relationship “may be distorted by fear or mistrust among conflicts of interest.”
Europe’s EV sales are already taking a hit
EV sales in the bloc plunged by 44% in August from the previous month, driving down overall new car sales (both traditional and EVs) to their lowest in three years. The shrinking sales of electric cars are partly due to diverging policies on green incentives across member states — such as some EU countries not having as extensive subsidies for EV buyer — but more because of existing tariffs on Chinese EVs that are adding to price tags, Reuters reported, and prices will likely only increase with this latest round of tariffs. European automakers are warning that without substantial policy change on EVs, the bloc could miss its 2025 deadline to meet certain CO2 reduction targets for automobiles.