INSIGHT: China slams EU over EV tariffs; trade war brewing

SINGAPORE (ICIS)–China has slammed EU’s proposal to impose provisional tariffs on imports of Chinese electric vehicles (EVs), denouncing it as a “blatant act of protectionism”, raising concerns that a trade war between Asia’s biggest economy and a new western front is brewing.

• EU tariffs on Chinese EVs to rise to 27-48%
• Retaliatory measures from China likely
• EU imports of China cars surge sevenfold over three years

“The European side has disregarded facts and WTO [World Trade Organization] rules, ignored China’s repeated strong opposition, and ignored the appeals and dissuasion of multiple EU member state governments and industries,” China’s Ministry of Commerce said in a statement issued late on 12 June.

The European Commission on 12 June notified Chinese automakers, including EV giant BYD, Geely, and state-owned SAIC Motor Corp, that it will impose additional provisional tariffs of 17% to 38% on imported Chinese EVs from around 4 July.

These will be applied to existing 10% tariffs imposed on all Chinese EVs, with the final rate determined by each carmaker’s level of cooperation with EU’s anti-subsidy investigation launched in September last year.

NEW FRONT FOR TIT-FOR-TAT TRADE WAR
China’s commerce ministry has urged the EU to “immediately correct its wrong practices” and “properly handle trade frictions through dialogue and consultation”.

The ministry said it will “resolutely take all necessary measures to firmly defend the legitimate rights and interests of Chinese companies”.

“This move by the European side not only harms the legitimate rights and interests of the Chinese electric vehicle industry but will also disrupt and distort the global automotive industry chain and supply chain, including the EU,” it said.

The EU’s move follows the US’ tariff hikes announced last month on Chinese imports of EVs, batteries and other materials, starting 1 August.

In 2018, then US President Donald Trump initiated a trade war with China by imposing tariffs on Chinese imports to address alleged trade imbalances, intellectual property theft, and unfair trade practices. China retaliated with tariffs on US goods, escalating tensions between the two biggest economies in the world.

While reviews by the US and EU on Chinese goods were under way, Beijing launched in May an anti-dumping investigation into imported polyoxymethylene (POM) copolymer, also known as polyformaldehyde copolymer – a key material in electronics and automotive manufacturing.

China’s commerce ministry alleged that the plastic is being sold below market value, harming domestic producers.

The probe, targeting imports from the US, EU, Taiwan, and Japan, could last up to 18 months and is seen as a direct response to their recent trade barriers against Chinese goods.

In the case of Taiwan, China has also suspended tariff concessions on 134 more products from the island, including base oil, chemicals, and chemical products, citing Taiwan’s supposed violations of the Cross-Strait Economic Cooperation Framework Agreement (ECFA) with the mainland.

Meanwhile, Japan’s tightened export controls on 23 types of semiconductor manufacturing equipment that took effect on July 2023 was deemed in line with restrictions imposed by the US and the Netherlands, potentially hindering China’s access to advanced chipmaking technology.

China may issue further retaliatory measures, potentially impacting global supply chains and escalating trade tensions with major economies in the west.

The automotive industry is a major global consumer of petrochemicals that contributes more than one-third of the raw material costs of an average vehicle.

The automotive sector drives demand for chemicals such as polypropylene (PP), along with nylon, polystyrene (PS), styrene butadiene rubber (SBR), polyurethane (PU), methyl methacrylate (MMA) and polymethyl methacrylate (PMMA).

CHINA 2023 CAR EXPORTS TO EU SURGE
China’s exports of automobiles to the EU have surged over the past year, particularly in the battery electric vehicle (BEV) segment, according to Nomura Global Markets Research.

Cars produced in China accounted for 20% of all BEV registrations in the EU during the first two months of 2024, it said, citing data from automotive business intelligence firm JATO Dynamics.

An analysis of January-April 2024 sales figures from China’s top three EV manufacturers in the EU, however, suggests that their overall presence in the region is still nascent, Nomura noted.

In 2023, EU’s imports of Chinese EVs surged to $11.5 billion, more than sevenfold increase from $1.6 billion in 2020, according to think thank Rhodium Group.

China accounted for 37% of EU’s total EV imports last year, it said.

In the first quarter of 2024, about 40% of China’s EV exports or 145,002 units went to Europe, according to official customs data.

Focus article by Nurluqman Suratman

Thumbnail image: An electric car at a charging station near the European Commission building in Brussels, Belgium. (Xinhua/Shutterstock)