The European Union (EU) is raising tariffs on Chinese electric vehicles (EVs) in a bid to address concerns about unfair subsidies that distort the European market.

The move, announced by the European Commission on Wednesday, will see tariffs on Chinese-made EVs increase from the current 10% to 38%, effective July 4th, unless a “solution” is reached with China regarding the subsidy issue.

This latest development marks an escalation in ongoing trade tensions between the EU and China, over subsidies on Chinese-made EVs.

The EU claims Chinese government support artificially lowers the cost of Chinese EVs, making them around 20% cheaper than their European counterparts. This price advantage, coupled with a surge in production by Western brands like Tesla and BMW in China, has led to a dramatic rise in Chinese EV imports into the EU. Eurostat data shows import figures jumping from 57,000 units in 2020 to over 437,000 in 2023.

The EU expresses concern that Chinese EV brands like BYD and SAIC are rapidly capturing market share due to these subsidies. The EU’s action is on a broader dispute over China’s alleged unfair state support for solar panels, batteries, and wind turbines.

Industry reactions have been mixed. While Chinese EV maker Nio said it would remain committed to the European market despite opposing the tariffs, the move has drawn criticism from some quarters within the EU.

German transport minister Volker Wissing cautioned against a potential “trade war” with China. Wissing argued for increased competition and improved business conditions within the EU as solutions, rather than trade barriers.

Ola Kaellenius, CEO of German carmaker Mercedes-Benz, called for dismantling trade barriers instead of creating new ones, emphasizing the importance of open markets for an exporting nation like Germany.

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