Is a trade war between China and the EU looming? That is at least what the German car manufacturers fear. They are directly affected by the punitive tariffs on the import of electric cars from China into the EU. For the Commission, however, the tariffs are a means of reducing risks.
German car manufacturers are in turmoil. The EU Commission has imposed provisional punitive tariffs on the import of electric cars from China into the European Union. German companies are also directly affected by this – including VW, BMW and Mercedes. VW, for example, produces together with the Chinese car company SAIC in a joint venture in the municipality of Anting near Shanghai. SAIC is subject to tariffs of 38 percent, while its Chinese competitors Geely and BYD must pay a levy of 20 and 17 percent respectively. German manufacturers must expect new tariffs of at least 21 percent. These are added to the 10 percent levy that was previously due on all imports of electric cars from China into the EU.
Federal Transport Minister Volker Wissing is therefore concerned. “Nobody wants a trade war with China. It would be a catastrophe for Germany and it would not be beneficial for the European Union either,” Wissing told the German Press Agency in Berlin. The economics ministers of all federal states also fear that the tariffs will damage domestic industry. “People think they are cutting off the Chinese, but they may be cutting off themselves,” said Bavaria’s economics minister Hubert Aiwanger at the end of a two-day meeting with his counterparts in Landshut.
What is met with incomprehension by many German politicians is, from the point of view of the EU Commission, a logical step. Under the keyword de-risking, it wants to reduce the risk of dependence on overpowering trading partners such as China. France in particular has repeatedly pushed for the introduction of the tariffs now imposed. Paris generally likes to rely on protectionist measures to improve its competitive position. The Chinese market is relatively unimportant for French car manufacturers such as the Stellantis Group or Renault compared to their German competitors. Back in September, Commission President Ursula von der Leyen announced that she would launch an investigation into Beijing’s state support for its electric car industry.
“For German car buyers, punitive tariffs would be a nightmare”
The result of the review: The excessive subsidization of Chinese e-car production across the entire supply chain leads to distortions of competition. It endangers the development of profitable electric vehicle production in this country. State support enables Chinese companies to make higher profits when exporting to Europe. Beijing then skims off these profits so that it can continue to invest in its companies. European car manufacturers cannot keep up in the price war in the long term. They have higher production costs because they benefit less from state aid than their competitors from China.
A price increase for buyers of Chinese electric cars in this country is not expected, according to Commission sources. It is assumed that Chinese companies will accept the lower profits due to the tariffs and will not pass on the higher costs to consumers.
Frank Schwope, lecturer in automotive economics at the FHM Hannover, takes a different view. “Punitive tariffs would be a nightmare for German car buyers and would make electric cars, which are already expensive, even more expensive,” he told ntv.de. By imposing import restrictions, the EU is massively damaging both the German car industry and consumers, turning them against itself. For all German car manufacturers, China has been by far the most important sales market for years. “Punitive tariffs by the EU would lead to countermeasures by the Chinese government and would place a massive burden on German manufacturers,” said Schwope.
Commission wants to negotiate with Beijing before imposing tariffs
In addition, there has so far been no major flood of Chinese electric cars onto the European market. From January to April, only 116,000 purely Chinese vehicles were sold in Western Europe, with total market sales of 4.01 million. The market share of originally Chinese electric cars in new registrations in Western Europe shrank from 3.0 to 2.9 percent. However, only Chinese manufacturers are considered original brands. The models that are manufactured in China for European brands and imported into the EU are not included.
In Germany, on the other hand, 111,005 pure electric vehicles (BEVs) were registered in the first four months of this year. The market share was thus 11.8 percent, up from 14.3 percent in 2023. Among these BEVs, 6,073 were electric vehicles from China – with a market share of 0.65 percent. Global market leader BYD, with its major expansion plans in Europe and Germany, only managed to sell 576 units.
It is not yet clear whether the punitive tariffs will actually be imposed. The Commission will continue to hold talks with companies and Chinese authorities until the beginning of July. It only wants to introduce the tariffs if it cannot agree on other solutions with Beijing. It has not disclosed what these solutions might be. If the negotiations come to nothing, the import restrictions will be introduced from July 4. However, these are only provisional tariffs. The Commission can also set these without the consent of the member states.
Tesla has applied for individually calculated customs duties
In November, the Council of European Heads of State and Government will vote on whether to make the tariffs permanent. A qualified majority is required to prevent the introduction of long-term punitive tariffs.
Not all manufacturers yet know what tariffs they have to expect. The US car manufacturer Tesla, which produces a lot in China for the European market, can be subject to an individually calculated tariff upon application, the Commission announced. Tesla produces the Model 3 and partly the Model Y in its factory in Shanghai for the European market. These models are the two best-selling electric cars in the EU.
The Commission is destroying the German car industry with its de-risking measures, says Ferdinand Dudenhöffer, director of the Center Automotive Research in Bochum, ntv.de. “By 2030, China will be as big a market for German car manufacturers as the USA and the EU combined,” says Dudenhöffer. It is absolutely necessary to focus on increased cooperation rather than isolation – also in order to drive forward technical innovations. Beijing has been consistently expanding battery technology for 30 years. If the EU now relies on protectionism and does not allow European manufacturers to learn from cooperation with Chinese companies, “German companies will not be allowed to participate in these technical innovations,” says Dudenhöffer. The same applies to autonomous driving technology and entertainment electronics in cars, where China is the leader. The Commission should listen to the industry’s recommendations instead of working against them.
De-risking for fear of possible Taiwan attack
This is not the first time that von der Leyen has been accused of doing too little for the economic interests of German companies. She is repeatedly criticized for ignoring the interests of industry – for example in the legal requirements for her climate agenda, the Green Deal. The CDU politician has often faced opposition in her party for her ambitious environmental policy. Party leader Merz in particular is urging von der Leyen to focus on economic prosperity if she takes office as EU Commission President for a second time. At an appearance with Merz in mid-February, von der Leyen promised improvement. She wants to achieve the climate goals together “with the economy”, and “planability and reliability for investors” are important to her, she emphasized.
However, predictability and reliability for investors are a tricky issue when it comes to economic cooperation with China. There is growing concern around the world that China will take over Taiwan. Beijing is making threatening gestures against the island state, which it does not recognize as an independent nation. If it invades Taiwan, the USA would have to keep its promise to support Taipei. This raises the question of whether the United States and its Western allies will have to impose extreme sanctions on Chinese products at some point. This abrupt decoupling from the Chinese economy would hit the EU harder than the punitive tariffs that are now being introduced. This is also the reason for von der Leyen’s de-risking strategy: she wants to gradually wean the European Union off its dependence on the Chinese economy in order to avoid a shock in the event of Taiwan being taken over.