Chinese EV Firms Can Absorb EU Tariffs: Expert

In fact, the EU on Wednesday only imposed a 17.4% tariff on BYD's EVs. The Hong Kong-listed BYD shares rose 5.82% to HK$232.8 (US$29.8) on Thursday. The Hang Seng Index, the benchmark for Hong Kong stock market, only rose by 0.97% to 18,112.

Last October the European Commission officially launched a 13-month investigation into whether government subsidies have helped Chinese EV makers win market share in Europe in recent years. It can impose provisional anti-subsidy duties nine months after the start of the probe.

The EC on Wednesday announced that it has“provisionally concluded” that Chinese EV manufacturers will face tariffs from July 4 if discussions with Chinese authorities do not lead to an effective solution.

According to the EC's decision, EV makers who cooperated with the investigation will face an average 21% duty while those who did not will face one up to 38.1%.

Specific charges will apply to BYD (17.4%), Geely (20%) and SAIC (38.1%). All these charges would come on top of the current rate of 10% tariff levied on all imported autos to the EU. It means Chinese EV makers may face a tariff up to 48.1%.

Non-Chinese car companies who produce some EVs in China will also be affected. However, Tesla may receive an“individually calculated duty rate” because of a specific request it had made.

Media reports said that Germany on Tuesday made a final effort to ask the EC to keep the EV tariffs as low as possible to avoid triggering China's retaliation.

After the EC's Wednesday announcement, German Transport Minister Volker Wissing posted on X that“the EU Commission's punitive tariffs affect German companies and their top products.”

German companies said they are worried that the EU tariffs will have consequences for the heavily export-orientated German economy.

Peisch, whose key roles at USTR included the coordination with European partners on tariff action addressing Chinese overcapacity, said it's a big challenge that Germany and its companies oppose the EU's new tariffs on Chinese EVs.

“Many German companies have made huge investments in China. And it's understandable that they would have concerns about the EU's tariff action and what it could mean for their markets in China,” she said.“They are kind of assuming that China is going to take retaliatory action.”

”But in my view, it's a bit short-sighted of Germany and those companies because I think China wants to capture the market share from those European sellers in its own market and penetrate into the EU market as well,” she added.“In the short term, there is still a lot of money to be made in China by these German producers. But are they going to be welcomed there in a number of years?”

She said German companies should plan for their long term development before China starts replacing them with local players.

European auto stocks fell on Wednesday and Thursday due to uncertainty over how China might respond to the EU's new tariffs.

On Thursday, Beijing vowed to take necessary measures after the EU decided to impose new tariffs on Chinese EVs.

“The China side will pay close attention to the follow-up progress of the European side and will resolutely take all necessary measures to resolutely defend the legitimate rights and interests of Chinese companies,” China's Ministry of Commerce said Thursday.

China's foreign ministry spokesperson Lin Jian said the EU's anti-subsidy investigation is a typical act of protectionism which ignores the facts and the World Trade Organization rules.

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“We urge the EU to heed the rational and objective views from various quarters, correct its wrong decision at once, stop turning trade into political issues, properly address economic and trade frictions through dialogue and consultation, and avoid harming the mutual trust, dialogue and cooperation between China and the EU,” Lin said.

China has abundant countermeasures against the EC's latest move, which does not conform to WTO principles, Sun Xiaohong, secretary-general of the automotive branch of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, told China Daily in an interview.

He said the EU's move is unreasonable and not good for trade development. He said the fact that Tesla has been temporarily excluded from the tariffs showed that the EU tariffs only target Chinese firms.

However, he added that China is still willing to negotiate with the EU to avoid a full-blown trade war.

Peisch said it's unclear what allegations and arguments China could have if the country would file a complaint to the WTO against the EU's tariff action.

“Just saying 'protectionism' does not make it inconsistent with the WTO rules,” she said.“They would have to find a specific way that the EU has not complied with those rules. And from the face of it, I don't know what that would be.”

Read: China to retaliate if Europe raises EV tariffs

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