MNI: EU Tariffs On China EVs Seen Higher After U.S. Move

The U.S. decision to slap 100% tariffs on Chinese electric vehicles is likely to prompt the European Union to impose higher provisional tariffs on its own much larger imports of EVs from China when it rules on the matter next month, presaging a probable shift towards a major-scale European industrial strategy, diplomats and business representatives in Brussels told MNI.

“Before the U.S. move expectations were that the EU could get away with around 15%,” said one EU business lobbyist following the issue, “Now, I think expectations are settling more around 25% to 35% or higher.”

Another Brussels industry source agreed, saying the continent's continuing security dependence on the U.S. means the European Commission will have to echo the measure by President Joe Biden, which came as he readies for November’s elections, when it presents its conclusions following an anti-subsidy probe into Chinese battery-electric vehicles next month.

“We are between a rock and a hard place,” the source said.

A report from influential think tank Rhodium suggesting that EU levies lower than 50% would have little impact has also added to speculation.

INDUSTRIAL STRATEGY

But, while tariffs would be in line with the push by French President Emmanuel Macron and French EU Industry Commissioner Thierry Breton for a long-term strategy to reindustrialise Europe and subsidise home-grown tech businesses, such a move would come despite resistance from Germany, whose Finance Minister Christian Lindner told reporters on Monday that China’s domination of the EV sector might be a result of comparative advantage rather than of government subsidies. (See MNI: China Should Negotiate With EU Over Potential EV Tariffs)

Big German businesses, led by Siemens and VW, are invested heavily in China, with each putting EUR10 billion of FDI into the country last year.

“Germany is very keen that China does not close its market,” an EU diplomatic source said, pointing also to fears that Beijing could retaliate by further tightening export controls on critical raw materials key to Europe’s green transition.

A recent European Chamber of Commerce in China survey suggested that European firms in the country see few good future options, an EU industry source noted.

“It’s a case of just enjoy it while it lasts,” the source said, “The strategy will either be, produce in China for China and separate the Chinese market from operations in the rest of the world or just scale down their business there.”

Former Italian Prime Minister Mario Draghi’s report on EU competitiveness to be discussed by the bloc’s leaders at their summit on June 27-28 is certain to back the broad thrust of Macron’s vision for a new industrial strategy, supported by more common funding and a more relaxed attitude towards state aid rules and competition policy.

Draghi also wants faster, variable-speed integration between EU economies in key policy areas like Capital Markets Union. (See MNI: Watered-Down EU Deal Points To Resistance To Draghi Plan)

Alicia Garcia-Herrero, a senior fellow at Brussels thinktank Bruegel and chief economist for Asia Pacific at Natixis, said Europe has no choice but to reindustrialise and finance it by common funding, as proposed by Macron and Draghi.

“If no-one was doing it already, I would say no. But I really don’t see how Europe keeps its industrial base without an industrial policy,” she said. “You won’t end second-, or third-, but fourth best if you don’t respond to what others are doing.”

EVs are a “lost battle” for Europe, she said, arguing for a shift towards newer sectors, like heat pumps and green hydrogen which China may already support but does not yet dominate.