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Sam Lowe is a partner at Flint Global, where he advises clients on UK and EU trade policy. He is also a senior visiting fellow at Kings College London and runs Most Favoured Nation, a newsletter about trade.
Earlier today, the European Commission announced the provisional results of its investigation into whether China-made electric vehicles are benefiting from unfair subsidies, and if so whether to apply tariffs.
Tl;dr: yes and yes.
As MainFT reports:
Brussels said that its probe revealed that the EV supply chain was “heavily subsidised in China, and that imports of Chinese [electric vehicles] presented a threat of clearly foreseeable and imminent injury to EU industry”.
There is a version of this post where I analyse DG Trade’s evidence and assess whether it justifies the tariffs being imposed.
Annoyingly, that information hasn’t been released yet (the deadline for publication is 4 July), so for now we’ll just have to make do with the headline tariff levels being imposed.
But — first things first — can any company that thinks it might be affected please make sure that the European Commission has spelt your name correctly?
As for the tariffs, they are broken down into three categories:
— the tariffs levied on the individual car companies/groups that were sampled as part of the investigation (BYD, Geely, and SAIC);
— other co-operating companies;
— all other companies.
BYD will be subject to the lowest tariff (17.4 per cent), with SAIC — owner of the MG marque — plus “all other companies” getting the highest, at 38.1 per cent.
See:
As per the press release, Tesla, which exports vehicles to the EU from China and was quite annoyed not to be included in the original sample, will now receive an individual assessment in due course:
A few points to note:
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The reporting on this story will be slightly confusing. These tariffs are in addition to the EU’s standard 10 per cent tariff on imported cars. So, the 21 per cent tariff, for example, on “other co-operating companies” amounts to a total tariff of 31 per cent (10 plus 21).
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The range of tariffs applied to the sampled firms is perhaps indicative of either a wide range in degrees of state subsidisation (or at least evidence of state subsidisation), or a wide range in degrees of co-operation from the relevant companies. Or both. We won’t know for certain until the European Commission publishes more details.
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These tariffs are highish, but not prohibitively high, at least for the two sampled firms with a lower rate and those in the “other co-operating companies” basket. My interpretation is that these are quite carefully calibrated to provide some additional protection to EU producers, while not antagonising China too much. I’ve written for Alphaville before about the possible retaliation risk, and we’ll find out soon enough whether the EU succeeds in avoiding a backlash from Beijing. In the EU’s favour: these tariffs are nowhere near the level of the US (102.5 per cent plus exclusion from IRA subsidies).
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I expect that there will soon be news reports suggesting that China will bring a WTO challenge against these tariffs. From an EU perspective, this would be a good outcome. Both the EU and China are party to an arrangement called the MPIA, which essentially allows disputes to be seen through to conclusion despite the official WTO appeals function being borked. A worse outcome would be China retaliating outside of the confines of international trade law.
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This isn’t the end of the story. Impacted companies now have some time to comment on the findings. The tariffs will then need to be made “definitive” by EU member states and have until the beginning of November to do so. This decision will be made via QMV. This means there is still time for member states to build a coalition in opposition to the tariffs, but it will be tricky. If definitively imposed, the tariffs usually last for five years.
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These tariffs apply to imports from China. But lots of these firms also make, or are planning to make, vehicles elsewhere. This leads me to believe that, if these tariffs stick, there will be further discussions in the coming years about tariff circumvention and pressure to spread the tariff net further.
Anyhow, assuming Louis lets me [Ed: I accept bribes], I plan to return to this for Alphaville when we have more information. Watch this space…