The European Union is set to announce a tariff on Chinese electric vehicles (EVs) in early June due to an anti-subsidy investigation initiated by the European Commission in October. The investigation aims to determine if Chinese EVs exported to the EU market have received excessive subsidies, resulting in unfair trade practices.
While the EU is still investigating, the United States has already raised its tariff on Chinese EVs from 25 percent to 100 percent in mid-May. This move was part of a broader effort to address China’s practice of subsidizing products like steel, aluminum, solar panels, and medical supplies, leading to unfair competition in global markets.
Chinese EVs have gained a significant market share in Europe, with about 20 percent of the market being occupied by them in the previous year. The European Commission notes that Chinese EVs are 20 percent cheaper than European models, making them attractive to consumers.
Experts anticipate that the EU may impose a tariff or quota on Chinese EVs following the investigation. The potential tariff is expected to be lower than the US’s 100 percent but could range from 45 to 80 percent to level the playing field between Chinese and European EVs.
World leaders have acknowledged the need for a collective response to China’s export of excess EV capacity. During the G7 finance ministers’ meeting, there were discussions about addressing China’s industrial overcapacity in a united manner.
The EU-China relationship has faced challenges, with the EU shifting its stance towards China as an economic competitor and systemic rival. This shift was marked by the launch of an anti-subsidy investigation into Chinese EVs last year.
Despite tensions and retaliatory measures, the relationship between China and the EU has not deteriorated into a complete trade showdown. Experts believe that while the relationship may not improve, it is unlikely to devolve into extreme trade conflicts. He emphasized that while the United States is urging the EU to push back against China, Europe still sees Russia as its main concern.
Janka Oertel, who leads the Asia Program at the European Council on Foreign Relations (ECFR), highlighted in a January report the importance of trust in the relationship between China and Europe.
She pointed out that EU countries should remember their decision to exclude Chinese vendors from the 5G rollout in 2019 and 2020, emphasizing the significance of trust in determining such partnerships.
Oertel warned that addressing the security risks associated with Chinese electric vehicles would be more challenging than dealing with telecom equipment in a 5G network.
Describing EVs as “smartphones on wheels,” former defense analyst Megan Khoo expressed concerns about the potential threat Chinese electric vehicles could pose to transportation infrastructure, similar to how Huawei impacted Europe’s telecommunications networks.
President Biden has called for an investigation into the potential data and infrastructure risks posed by Chinese vehicles in the United States, referring to them as “connected” and “smartphones on wheels.”
The UK Parliament is also examining the issue, with concerns raised about the impact of Chinese connected EVs flooding the country.
According to China’s Counterespionage Law, Chinese EV companies like BYD are required to hand over foreign user data upon request by authorities.
Khoo urged European countries to take strict measures to mitigate security risks associated with the use of Chinese EVs in sensitive areas.
There are concerns that Chinese EVs could be used as a means for China to gather intelligence in European countries, with no clear solution from the EU at present.
Terri Wu contributed to this report.
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