Beijing said on Wednesday it had filed a complaint with the World Trade Organization against the European Union’s decision to impose high tariffs on electric cars made in China.
The additional taxes of up to 35% were announced on Tuesday after an EU investigation found Chinese state subsidies were undercutting European carmakers. But the move faced resistance from Germany and Hungary, who fear it would provoke Beijing’s wrath and trigger a bitter trade war.
China criticized Brussels’ decision on Wednesday morning, saying it did not “agree or accept” the tariffs and had filed a complaint with the World Trade Organization’s (WTO) dispute settlement mechanism.
“China will… take all necessary measures to resolutely protect the legitimate rights and interests of Chinese companies,” the Beijing Commerce Ministry said.
EU trade chief Valdis Dombrovskis said on Tuesday: “By adopting these proportionate and targeted measures after a rigorous investigation, we are committed to fair market practices and to the European industrial base.”
“We welcome competition, including in the electric vehicle sector, but it must be underpinned by fairness and a level playing field,” he said.
However, the German automotive industry’s largest association warned that the tariffs would increase the risk of a “wide-ranging trade conflict,” while a Chinese trade group criticized the “politically motivated” decision even as it urged dialogue between the two sides.
The tariffs are in addition to the current 10% on imports of electric vehicles from China.
The decision came into effect after it was published in the EU’s Official Journal on Tuesday and the tariffs will come into force from Wednesday.
Once this is the case, the tariffs are final and apply for five years.
The additional tariffs also apply at different rates to vehicles manufactured in China by foreign companies such as Tesla, which are subject to a tariff of 7.8%.
Chinese car giant Geely – one of the country’s biggest electric car sellers – faces an additional tariff of 18.8%, while SAIC faces the highest tariff at 35.3%.
Ailing companies
The tariffs are not supported by the majority of the EU’s 27 member states, but in a vote earlier this month there was not enough opposition to block them, which would have required at least 15 states representing 65% of the EU population.
The EU launched the investigation to protect its car industry, which employs around 14 million people.
France, which pushed for the investigation, welcomed the decision.
“The European Union is taking a crucial decision to protect and defend our commercial interests at a time when our automotive industry needs our support more than ever,” French Finance Minister Antoine Armand said in a statement.
But Europe’s larger carmakers, including German car giant Volkswagen, have criticized the EU’s approach and called on Brussels to resolve the issue through talks.
The additional tariffs are “a step backwards for free world trade and thus for prosperity, job retention and growth in Europe,” said the President of the Association of the Automotive Industry, Hildegard Müller, on Tuesday after the announcement.
Volkswagen, which has been hit hard by increasing competition in China, had previously said the tariffs would not improve the competitiveness of the European auto industry.
That warning came weeks before the troubled giant announced plans on Monday to close at least three factories in Germany and cut tens of thousands of jobs.
Retaliation
Talks between the EU and China are ongoing and tariffs may be lifted if a satisfactory agreement is reached. But officials from both sides have pointed to differences.
Discussions focused on minimum prices that would replace tariffs and force automakers in China to sell vehicles at a certain price to offset subsidies.
“We remain open to a possible alternative solution that effectively addresses the identified issues and would be WTO compatible,” Dombrovskis said.
The Chinese Chamber of Commerce at the EU called on Brussels and Beijing to “accelerate talks on setting minimum prices and ultimately abolishing these tariffs.”
The EU could now face Chinese retaliation, as Beijing announced on October 8 that it would impose temporary tariffs on European brandy.
Beijing has also launched an investigation into EU subsidies for some dairy and pork products imported into China.
Trade tensions between China and the EU are not just limited to electric cars, Brussels is also examining Chinese subsidies for solar panels and wind turbines.
The EU is not the only one to impose high tariffs on Chinese electric cars.
Canada and the US have imposed significantly higher tariffs of 100% on Chinese electric car imports in recent months.
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