EU threatens tariffs on Chinese EVs: will the steel sector feel the pinch?
On June 12, the European Union (EU) announced plans to impose up to 38.1% tariffs on electric vehicles (EVs) imported from China. This decision follows an investigation revealing that Chinese EVs are heavily subsidized by their government, giving them an unfair competitive advantage in the European market. The tariffs, set to take effect on July 4, 2024, come on top of these vehicles' existing 10% import duty, potentially raising costs significantly for Chinese manufacturers like BYD, Geely, and SAIC.
EU counters rising Chinese EV market share
Chinese car exports to the EU have surged in recent years, with their market share projected to reach 15% by 2025. In contrast, the EU aims to safeguard its automotive sector - which is also critical to its steel industry. The automotive industry accounts for about 17% of steel consumption in Europe. According to the Taiwan-based Yieh Corporation, "Although the auto industry accounts for only 5.5%–6.5% of China's total domestic steel consumption, any drop in auto production critically affects (trading of) hot-rolled coils, cold-rolled coils, and hot-dip galvanized products."
Talks aim to resolve trade dispute
In response to the EU's announcement, both China and the EU have agreed to hold talks in an attempt to resolve the issue amicably. High-level discussions between EU Trade Commissioner Valdis Dombrovskis and his Chinese counterpart Wang Wentao have commenced, aiming to address concerns over subsidies and trade practices.
The outcome of these talks will be crucial in determining the future of EU-China trade relations in the automotive sector, with potential implications for global trade dynamics and the stability of the automotive supply chain.
EU tariffs and the broader trade landscape
The EU's tariffs raise concerns about a potential domino effect. European automakers themselves argue that tariffs and restrictions harm free competition, the global flow of goods, and the free market. Underlying these concerns is the fear of Chinese retaliation, as China is a major market for European car manufacturers.
The EU's announcement follows the US's decision on May 14 to significantly increase tariffs on Chinese EVs, bringing them to 100%.
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