Economic Watch: EU risks backfire with proposed tariffs on Chinese EVs

People visit the booth of Chinese carmaker Xpeng during the 2023 International Motor Show in Munich, Germany, Sept. 5, 2023. (Xinhua/Ren Pengfei)

Experts are concerned about the potential long-term impact on the EU's auto industry and broader trade relations with China brought by the tariffs.

BRUSSELS, Aug. 26 (Xinhua) -- The European Commission's plan to impose tariffs of up to 36.3 percent on Chinese-made electric vehicles (EVs) has sparked concerns among industry experts and business insiders across Europe.

Critics argue that the move may worsen the competitiveness issues of the European Union (EU), hinder the region's green transition and escalate trade tensions with China rather than protect the European auto industry as intended.

STRONG OPPOSITION

Michael Schumann, chairman of the Board of the German Federal Association for Economic Development and Foreign Trade, condemned the EU's proposal as "erroneous," emphasizing the association's strong opposition.

"The Chinese EV industry has become, and will continue to be, a global innovation benchmark," Schumann said, adding that Chinese automakers have made significant strides in smart technology, enhanced their research and development (R&D) capabilities, and actively invested in Europe's auto industry, contributing to the sector's evolution.

Tadas Povilauskas, an economist at SEB Bank in Lithuania, described the EU's investigations into Chinese auto industry subsidies as a "political move." He noted that the influx of Chinese EV imports will intensify competition for European automakers, driving them to seek ways to remain competitive.

Zoltan Kiszelly, director of the Center of Political Analyses at Hungary's Szazadveg Institute, labeled the EU's plan as "shortsighted," noting that it comes as European manufacturers struggle with declining EV sales in their core market, Europe.

Kiszelly argued that the root of Europe's competitiveness challenges lies within the EU rather than in China's subsidies.

"The best course of action would be to encourage competition to drive down prices and push European car manufacturers to innovate further," Kiszelly said. "Improvement is better achieved through competition than through isolation and decoupling."

Kiszelly pointed out that Western companies have benefited from their presence in China for decades and urged them to face competition from Chinese EV manufacturers rather than attempt to limit or ban them.

HINDERING EUROPE'S GREEN TRANSITION

Experts and officials also expressed concerns about the potential contradiction between the EU's green ambitions and its tariff policies.

"The EU's temporary anti-subsidy tariffs on Chinese EVs hinder mutually beneficial cooperation and obstruct the green and low-carbon transition," Schumann warned.

Luigi Gambardella, president of the Brussels-based international digital association ChinaEU, criticized the EU's protectionist measures, stating that they "risk stifling future advancements in mobility technologies."

He encouraged efforts to advance mutual investment, foster mutual growth and ensure that the benefits of EV technology are shared more widely.

"EVs are crucial for Europe's transition to a low-carbon economy," Gambardella said, pointing out that high costs already pose a significant barrier to widespread EV adoption. He argued that the proposed tariffs could further slow consumer adoption of electric vehicles, undermining Europe's climate goals and delaying the shift away from fossil fuels.

"We hope to see a greater variety of EV brands on the market, particularly cost-effective Chinese models, to accelerate Germany's green and low-carbon transition," Schumann said, highlighting China's role in the global green transformation of the transportation sector.

Croatian political analyst Mladen Plese said that the Europeans are returning to classic outdated technologies in the auto industry because of the high prices of EVs. "If the prices of EVs continue to be high, this will certainly continue, and this will threaten the green transition in Europe."

"THREAT TO CURRENT MARKET CONDITIONS"

Experts are concerned about the potential long-term impact on the EU's auto industry and broader trade relations with China brought by the tariffs.

Triinu Prits, head of the foreign trade policy and international economic organizations' division at Estonia's Ministry of Foreign Affairs, noted that while Estonia lacks an automotive industry, the EU's tariff measures would still affect the country's subcontractors, importers, car maintenance providers and consumers.

"Tariffs could make the European market less attractive to Chinese firms looking to collaborate or enter the European market," Gambardella warned. He said that protectionist measures are clearly "a threat to current market conditions" and could have far-reaching consequences for the future of mobility in Europe.

"Any political or economic measures, including potential countermeasures, could lead to unpredictable consequences," Prits said.