China Threatens EU, US With Stiff Tariffs On Imported ICE Cars

With looming threat of tariffs on both sides of the Atlantic, China has responded in kind by issuing threats of its own stiff tariffs on EU and US imports of ICE cars with large capacities to China.

China has responded to the United States' decision to increase tariffs on Chinese-made electric vehicles (EVs) from 25% to 100% by threatening to temporarily raise tariffs on imported US-made cars with large-capacity engines.

Besides the US, China also threatens similar acts for automakers from the European Union (EU). This is likely a retaliation over the EU’s aim at increasing import duties on Chinese EVs from 10% to a higher rate on July 4, following Belgium's investigation into Chinese electric car subsidies, which were deemed to be unfair to European carmakers.

The China Chamber of Commerce to the EU (CCCEU) revealed in a series of statements posted on X (Twitter) that China is considering raising its temporary tariff rate on imported large-engine vehicles to a maximum of 25%, up from the current 15%. 

This suggestion came from Liu Bin, chief expert at the China Automotive Technology and Research Centre and deputy director of the China Automotive Strategy and Policy Research Centre, in an exclusive interview with the Global Times. 

The proposed tariff adjustment is said to comply with World Trade Organisation (WTO) regulations and would affect petrol-powered sedans and SUVs with engine capacities larger than 2.5 liters.

In a recent statement on June 3, 2024, China’s minister of commerce, Wang Wentao, criticized the EU’s anti-subsidy investigation into Chinese EVs. He referred to the investigation, along with the ‘Foreign Subsidies Regulation (FSR)’ applied on July 12, 2023, and the ‘International Procurement Instrument (IPI)’ that took effect on August 29, 2022, as the “three arrows” of protectionism aimed at China.

Chinese EV-makers risk billions of Dollars and Euros in additional costs as a result of the tariffs threatened by governments on both sides of the Atlantic.

Previously, on May 31, 2024, the CCCEU published remarks from a press conference where Mao Ning, deputy director of the Information Department of the Ministry of Foreign Affairs of China, expressed China’s stance on the EU’s investigation.

She labelled the investigation as protectionist and accused it of being unjustifiable and inconsistent with the rules. Mao Ning asserted that the EU's accusations of China’s subsidization were unfounded and emphasized that China would not passively accept these measures, vowing to take necessary actions to protect its rights and interests.

Chinese automaker Chery is poised to set up its first EU-based production facility in Spain soon. Spain is being wooed by China and Chinese automakers to become an ally in this tariffs dispute brewing in the EU.

On the other hand, the Chinese government is also trying to woo the Spanish government to their side in this tariff battle. 

Recently, China's Chery Auto partnered with Spain's EV Motors to produce cars at its first factory in Europe. The plant, which was shuttered by Nissan in 2021, will be used later this year to recover 1,600 direct jobs. Chery will initially produce its Omoda vehicles at the plant, while EV Motors will start producing its own vehicles in the fourth quarter.

China’s commerce ministry expressed hopes that Spain would advocate for the European Union to support and foster the new energy industry, promoting deeper cooperation and a fair, predictable development environment.

During a meeting in Madrid with Spanish economy and industry ministers, Wang urged Spain to encourage the EU to remain open to green and new energy sectors, criticizing the EU’s investigation as protectionist. He also highlighted China’s willingness to collaborate with Spain to enhance trade, boost mutual investments, and expand cooperation. KR