By Kelsey McGillis
Law Student Editor
This week, the European Union (EU) and China agreed to hold consultations regarding the EU’s proposed tariffs to be imposed on Chinese-made electric vehicles (EVs) entering the European market. This decision signals a potential resolution in the months-long contentious subsidy dispute between the two regions. The current tensions trace back to a probe launched by the European Commission last year, to determine if Chinese subsidies directed to Chinese EV manufacturers were allowing such EV manufacturers to sell vehicles within the EU at artificially low prices, thus harming their European competitors. China has vehemently denied these claims, insisting that its EV industry’s growth is a result of fair competition and not subsidy supported. That China has a command economy inevitably complicates the analysis of competitive cost. The Commission’s findings led to an announcement of potential tariffs; up to 48% of the value of imported Chinese EVs. These tariffs directed at the manufacturers are set to come into force on July 4, with the proposed application of duties, levied on the consumers, expected by November, 2024.
While the European Commission describes the tariffs as corrective measures to level the playing field, critics argue that such tariffs may trigger a broader trade war. Germany, whose economy heavily relies on the Chinese market, has shown reluctance to support countervailing duties. European automakers have also voiced concerns in claiming that such tariffs directly contribute to global trade fragmentation. Conversely, the United States has adopted a much more aggressive stance, recently imposing a 100% tariff on Chinese EV imports in an effort to offset the alleged subsidies.
China, not surprisingly, has responded to the EU’s actions by threatening reciprocal tariffs on a variety of EU goods, and have indicated they may file a claim the World Trade Organization (WTO) Dispute Settlement Body if its concerns are not addressed. Amid the tensions, the agreement to hold technical talks in Brussels offers a glimmer of hope. European Commission Spokesperson Johanna Bernsel confirmed that there would be technical discussions aimed at finding a solution that addresses the perceived subsidization of Chinese EVs. This move is seen as a step towards de-escalating the situation and finding a mutually acceptable resolution.