EU Tariffs on Chinese EVs Threaten Trade Relations and Prices

New EU tariffs on Chinese EVs may lead to higher prices and trade tensions.

By Thea Felicity

Oct 04 2024, 12:50 PM EDT

CHINA-ECONOMY-AUTOMOBILE-EVS — A driver prepares to transport cars at a factory of electric vehicle (EV) manufacturer Leapmotor in Jinhua, China's eastern Zhejiang province on September 18, 2024. ADEK BERRY/AFP via Getty Images

EU recently imposed new tariffs on Chinese electric vehicles, after gaining massive support from member states.

The new high taxes are a move to protect the EU's car industry after it found that the Chinese government employs unfair subsidies. From 10%, the new tariff will increase tax to 45%, effective for the next five years.

BBC reported that China is not the only one affected as it could also lead to higher EV prices for consumers. At the same time, it gained opposition from France and Germany as they believed it could risk a huge trade war with China, besides the "unfair protectionism" of EU vehicles.

New EU Tariffs and China's Economy

Prior to the EU's new tariff on Chinese EVs, VCPost shared that the country is relying on high-tech products like EVs to boost its "flashing red" economy, So far, the EU has been its largest overseas market, with BYD and other top Chinese EV brands expanding rapidly into EU's state members.

The European Commission also set specific tariffs for major brands, depending on how much state financial assistance each received. This applied to Geely, BYD, and SAIC.

Countries like Italy, France, Poland, and the Netherlands supported the proposed import tariffs, Germany, however, urged China and the union to discuss tariffs to prevent trade tensions. EU stated that it would work to find alternative solutions to address the "injurious subsidization" of Chinese EVs, to which China agreed.

EV Market in the EU

According to Bloomberg, a possible trade dispute would especially hurt the EV industry in the EU as registrations for them already dropped by 43.9% compared to 2023 data. Experts believe that the EV market in the union is not growing fast enough to meet mandatory sales targets, and imposing more taxes on Chinese-imported EVs will worsen this situation.

With plans to ban petrol and diesel vehicles for 2035, the EV industry is bound to suffer more in the following years. This is where the proposed incentives for drivers come in, which Singapore has already been doing.