The Chinese Communist Party is aggressively dumping cheap new energy products globally, driving down market prices and putting significant pressure on local green manufacturing industries in various countries. The Atlantic Council in the United States published an analysis article titled “EU to Face Massive Imports of New Chinese Products (Electric Vehicles, Solar Panels, and Lithium Batteries) Without Imposing Tariffs” on Wednesday, urging the EU to “selectively and carefully raise tariffs and restrictions to prevent the dumping of Chinese products”.
The article highlights that EU tariff decisions are crucial for electric vehicles and batteries as these products hold significant economic and strategic importance. The EU automotive industry directly or indirectly creates nearly 14 million job positions, accounting for 6.1% of the EU workforce, making electric vehicles and batteries crucial drivers of the EU economy. Subsidies on vehicle exports from China pose risks to these industries.
In 2023, China exported lithium-ion batteries worth $23.3 billion, solar panels worth $19.1 billion, and electric vehicles worth $14.5 billion to the EU. Last year, China sold nearly 500,000 electric vehicles to EU countries, surpassing any other region globally, accounting for almost one-third of China’s total electric vehicle exports (approximately 1.5 million vehicles).
Last week, the Biden administration announced imposing new tariffs on $18 billion worth of goods imported from China. The US government is rallying European allies to counter China’s unfair trade practices. The European Commission appears determined to lead EU’s 27 countries in implementing new tariff measures against China.
According to reports, US Treasury Secretary Janet L. Yellen urged urgent EU intervention during a speech at the Frankfurt School of Finance and Management on Tuesday, expressing concerns over the growth of China’s cheap export products. Yellen emphasized the need for the US and its Western allies to respond in a coordinated manner as China’s increased production poses a threat to all market industries.
Earlier that day, European Commission President Ursula von der Leyen hinted at imposing tariffs on Chinese electric vehicles following the completion of a national subsidies investigation into China’s automotive industry. She indicated a probable tariff increase but suggested it would not match the rates imposed by the US.
A study by the Rhodium Group consultancy firm revealed that Chinese automakers enjoy a 30% or higher cost advantage over their European competitors, with China capturing 19% of the European electric vehicle market share in 2021, up from 16% in 2022.
Despite strong opposition and warnings from top German officials led by Chancellor Olaf Scholz, the European Commission plans to officially announce preliminary anti-subsidy tariffs on Chinese electric vehicles in early July.
Concerns about retaliatory actions from China have prompted the German government to caution against imposing tariffs. In a recent statement, the China-EU Chamber of Commerce mentioned a potential increase in temporary tariff rates on high-displacement engine car imports from China.
German automotive giants BMW and Volkswagen executives urged the EU not to impose import tariffs on electric vehicles from Chinese manufacturers, fearing disruptions to the EU’s green agreement plans. China is BMW’s second-largest market after Europe, accounting for nearly 32% of first-quarter sales. BMW imports Mini EV and iX3 models manufactured in China to Europe.
Following the EU’s anti-subsidy investigation into Chinese companies, China announced initiating an anti-dumping investigation into Brandy imports from the EU in January. Chinese customs data showed Brandy imports reaching $15.7 billion from January to November 2023, with French Brandy accounting for 99.8% of EU exports.
France is actively pushing for EU investigations into Chinese electric vehicle companies for anti-dumping and anti-subsidy measures, aiming to raise tariffs on Chinese electric cars to alleviate pressure on low-priced French automakers. Unlike France, German automakers mostly sell vehicles in the high-end market segment, remaining less vulnerable to intense competition from China.
A study by the Kiel Institute revealed that Chinese electric vehicle manufacturers receive substantial state subsidies, with BYD receiving over €2 billion in subsidies annually.
European political news website Politico reported growing consensus within the EU against China’s unfair state subsidies. The EU Climate Action Commissioner Wopke Hoekstra warned of the EU’s increasing reliance on China in transitioning towards green technologies, posing a future issue.
Europe is installing solar panels at record speeds, mostly sourced from China, placing strain on Europe’s few solar panel manufacturers competing against Chinese firms, prompting some manufacturers to reduce production or invest in the US.
In February, the European Solar Manufacturing Council, representing around 80 companies, urged the EU to urgently restrict Chinese access to the EU photovoltaic market to save their industry. However, the European Commission cautioned that import restrictions could hinder the EU’s goal to increase solar power capacity from the current 263 gigawatts to 600 gigawatts by 2030.
A draft document signed by more than 20 EU countries indicated expanded support for struggling European solar panel manufacturers but refrained from limiting imports of low-priced solar panels from mainland China.
Reaching a consensus within the EU on such matters remains a significant challenge for the 27 member states. Discord among EU countries on the China issue benefits China, which seeks to capitalize on European disunity.
Facing the influx of cheap Chinese products, the EU has adopted a strategy of targeting specific cases of subsidies from mainland China. In April, the EU initiated two investigations to scrutinize whether Chinese bidders benefited excessively from subsidies in European public tenders.
The EU will elect a new European Parliament in June, followed by a new European Commission president. Von der Leyen is leveraging the anti-subsidy investigation into Chinese exports as a key point for her re-election campaign.
During a campaign rally in Karlsruhe, Germany, she stated, “We favor fair competition. What we don’t like is the flood of Chinese electric vehicles heavily subsidized in the market. We are taking action against this practice.”