The Chinese government has formally lodged a complaint with the World Trade Organization (WTO) against the European Union (EU) regarding tariffs imposed on electric vehicles manufactured in China. This action, taken on Friday, signifies escalating tensions between the two economic powerhouses. The EU’s decision to implement these tariffs has sparked strong disapproval in Beijing, leading the Chinese government to launch investigations into exports of French cognac and European pork. This retaliatory move has fueled concerns among analysts that the situation could spiral into a full-blown trade war with the EU, potentially inflicting substantial economic harm on both sides.
China has asserted its recourse to the WTO dispute settlement mechanism “to safeguard the development rights and interests of the electric vehicle industry and cooperation on the global green transformation,” according to a statement from China’s Commerce Ministry. The EU, on the other hand, has imposed provisional tariffs of up to 37.6% on EVs made in China, arguing that they unfairly benefit from government subsidies. China maintains that its support for the EV industry aligns with WTO regulations.
The two sides have a deadline of early November to attempt to resolve their differences, after which the provisional tariffs will become official. Notably, China’s auto exports surged in July compared to the same month last year, while domestic sales dipped, as reported by an industry association on Friday. China’s Commerce Ministry has emphasized that the EU tariffs contravene WTO rules and undermine global cooperation on climate change.
China’s significant increase in its share of the European Union’s electric-battery-powered car market, growing from 3% in 2020 to 25% currently, has raised alarm bells among EU officials. A report highlights concerns that without intervention, the European automotive industry, employing 2.5 million people and supporting an additional 10.3 million jobs in the broader supply chain, could suffer substantial damage.
The EU’s past experience with Chinese competitors in the solar panel sector, where subsidized Chinese companies gained a competitive edge, serves as a cautionary tale. In response to these concerns, the European Union imposed provisional duties of up to 38% on Chinese electric car imports in July, citing “unfair” state subsidies. This move was made despite warnings from Beijing that it could trigger a trade war. A European Commission investigation initiated last year concluded that Chinese electric vehicle manufacturers received state subsidies that unfairly undercut their European competitors. The EU’s objective is to safeguard its domestic industry as it transitions from thermal to electric power.
