China: EV tariffs to begin in October – Commerzbank

The European Union (EU) voted last Friday to impose an additional 35% on imports of Chinese electric vehicles (EV), Commerzbank's FX analysts Charlie Lay and Xuan Hui Lorraine Seah note.

Chinese market remains closed today

“It comes on top of the existing 10% levy, bringing the total to 45%. It will be effective at the end of this month and last for five years. It follows a year-long investigation by the European Commission into the EV market. It concluded that Chinese EV makers received heavy state subsidies, including their suppliers.”

“Chinese automakers in the European market face a difficult decision, either absorb the tariffs, which will reduce profit margins, or raise prices and risk a decline in demand. Some producers are considering shifting production to Europe to avoid the tariffs. China has already threatened to impose tariffs on European brandy, dairy, pork, and auto imports. Nevertheless, both parties have expressed willingness to continue negotiations for an alternative solution that will adequately address concerns over China’s huge state subsidies.”

“10 member states reportedly voted in favour of the additional tariffs, including France, Italy, and Poland. 5 members, including Germany, Hungary, Slovakia, Slovenia, and Malta, voted against them. China is a major export market for Germany and Hungary who had pushed for a more muted response. The remaining 12 members abstained. The Chinese market remains closed today and will reopen tomorrow.”