China may impose tariffs as high as 25 per cent on imported cars with large engines, according to the China Chamber of Commerce to the EU (CCCEU), signalling heightened trade tensions with the US and European Union. This potential move, revealed by insiders, could significantly impact European and American automakers and strain Beijing’s relations with Brussels.
The possible tariffs come as the European Commission prepares to announce its decision on whether to impose duties on Chinese electric vehicles (EVs) by June 5. The EU is investigating Chinese subsidies in its booming EV market, and China has responded with threats of reciprocal tariffs on European wine and dairy products.
The CCCEU highlighted comments from Liu Bin, chief expert at the China Automotive Technology & Research Center, published in the Communist Party’s Global Times newspaper. Liu suggested temporarily raising tariffs on imported cars with engines larger than 2.5 litres, which could legally reach up to 25 per cent under World Trade Organization rules. In 2023, China imported around 250,000 such cars, making up about 32 per cent of all imported vehicles.
Key manufacturers likely to be affected by these tariffs include Toyota, Mercedes-Benz, and BMW. Daniel Kollar, head of consultancy Intralink’s automotive and mobility practice, noted that Toyota’s Lexus brand would be impacted only if China targets imports from all countries, not just the US or EU.
Despite China’s retaliatory stance, the EU remains firm in its position. Eurasia Group analysts noted that Brussels aims to send a strong message to Beijing through its EV subsidy investigation, signalling that it will counteract Chinese market overcapacity and subsidies.
China’s export of 1.55 million EVs last year, with significant shipments to Europe and North America, underscores the global reach of its automotive industry. The Biden administration has recently announced 100 per cent tariffs on Chinese electric cars, while the EU continues its investigation into Chinese subsidies across various sectors. This scrutiny is driven by China’s dominance in the battery supply chain and its expanding EV production, which has raised concerns about cybersecurity and market overcapacity.
Earlier this month, President Xi Jinping visited Europe, attempting to dissuade the EU from aligning with the US’s tough stance on Chinese imports. Xi’s visit highlights Beijing’s concern that American allies might adopt similar restrictive measures.
In his interview with the Global Times, Liu Bin criticized these restrictive measures, arguing that they contradict the green development concept and ultimately harm the interests of consumers in the regions imposing them.
The unfolding trade tensions between China, the US, and the EU could have wide-reaching implications for the global automotive industry and international trade relations, particularly as each side seeks to protect its economic interests in a rapidly evolving market.
(With inputs from agencies)
