FRANKFURT – The European Union has completed its Markedly higher customs duties in electric vehicles imported from China. Electric vehicles are the latest flashpoint in a broader trade dispute over Chinese government subsidies and Beijing’s booming exports of green technology to the bloc of 27 nations.

The tariffs provisionally came into effect in July and were finalized after talks between the EU and China failed to resolve their differences. Negotiations are expected to continue and the EU could remove tariffs if a deal is reached.

Below are some basic facts about EU customs duties:

What did the European Union do?

The European Commission, the EU’s executive arm, conducted an eight-month investigation and concluded that companies making electric cars in China benefit from massive government aid that allows them to undercut rivals in the EU on prices. take a large market share and threaten European jobs. .

The fees differ depending on the manufacturer: 17% for BYD, 18.8% for Geely and 35.3% for the state-owned SAIC. Other electric vehicle makers in China, including Volkswagen and BMW, would be subject to a 20.7% tariff. The commission has an individually calculated rate for tesla of 7.8%.

“By adopting these proportionate and targeted measures after a rigorous investigation, we defend fair market practices and the European industrial base,” said European Commission Executive Vice President Valdis Dombrovskis.

The rights will remain in force for five years unless an amicable solution is found.

Why did the commission take action?

Electric cars made in China rose from 3.9% of the EV market in 2020 to 25% in September 2023, the commission said.

The commission says companies in China achieved that with the help of subsidies along the entire production chain, from cheap land for local government factories to below-market supplies of lithium and batteries by state-owned companies. , tax exemptions and below-interest financing. of state-controlled banks.

The rapid growth in market share has raised fears that Chinese cars will end up threatening the EU’s ability to produce its own green technology needed to combat climate change, as well as the jobs of 2.5 million workers in risk in the automobile industry and 10.3 million more people. whose jobs indirectly depend on the production of electric vehicles.

China’s subsidized solar panels have wiped out European producers, an experience that European governments do not want repeated with their automotive industry.

Unusually, the commission acted on its own, without a complaint from the European car industry. Industry leaders and Germany, home to BMW, Volkswagen and Mercedes-Benz, have opposed the tariffs. That’s because many of the cars that will be affected by the tariffs are made by European companies, and China could retaliate against the auto industry or in other areas.

How is China reacting?

Beijing has sharply criticized the investigation and higher tariffs as protectionist and unfair.

The Trade Ministry has also launched anti-dumping investigations into European exports of brandy, pork and dairy products. Earlier this month, he announced provisional tariffs from 30.6% to 39% on French and other European brandies, after EU member countries voted to end tariffs on electric vehicles.

Officials have also said they are weighing the possibility of raising tariffs on imports of gasoline vehicles with large engines.

Talks between both parties have focused in recent weeks on so-called “price commitments” as a possible solution. In such a scenario, automakers would agree on a minimum selling price for their electric vehicles in Europe.

Some Chinese automakers are considering making cars in Europe to avoid tariffs and be closer to the market. BYD is building a plant in Hungary, while Chery has a joint venture to make cars in the Spanish region of Catalonia.

How do the EU tariffs compare with those announced by the United States?

The Biden administration is increasing tariffs in Chinese electric vehicles to 100% from the current 25%. At that level, U.S. tariffs block virtually all Chinese imports of electric vehicles.

That is not what Europe is trying to do.

EU officials want affordable electric cars from abroad to achieve their goals of reducing greenhouse gas emissions by 55% by 2030, but without the subsidies that EU leaders consider unfair competition.

The planned tariffs aim to level the playing field by approximating the size of excessive or unfair subsidies available to Chinese automakers.

European countries also subsidize electric cars. The issue in trade disputes is whether subsidies are fair and available to all automakers or whether they distort the market in favor of one party.

What does this mean for European drivers and car manufacturers?

It’s unclear what impact the tariffs will have on car prices. Chinese automakers are able to make cars so cheaply that they could absorb the tariffs in the form of lower profits rather than raising prices.

Currently, Chinese automakers often sell their vehicles abroad at much higher prices than in China, meaning they prefer profits over market share, even taking into account their recent market gains. Five of BYD’s six models would still make profits in Europe even with a 30% tariff, according to Rhodium Group calculations.

BYD’s Seal U Comfort model sells for the equivalent of 21,769 euros ($23,370) in China but 41,990 euros ($45,078) in Europe, according to Rhodium. The base model of BYD’s compact seagullwhich will arrive in Europe next year, sells for about $10,000 in China.

While consumers could benefit from cheaper Chinese cars in the short term, allowing unfair practices could eventually mean less competition and higher prices in the long term, the commission argues.

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Moritsugu reported from Beijing.