China and EU set to discuss tariff hike on electric vehicles amid trade tensions

Leapmotor vehicles are parked outside a showroom in eastern China's Zhejiang province. China and the European Union are open to holding talks on EV tariffs

China and the European Union have expressed their willingness to discuss the EU's recent decision to significantly increase tariffs on Chinese-made electric vehicles, according to officials from both sides.

Over the weekend, China's Commerce Ministry and Germany's economy minister confirmed that each party is open to talks on the matter. Meanwhile, Chinese state media reported on Monday that Beijing is urging the EU to abandon its plans to drastically raise provisional tariffs on imports of Chinese-made electric vehicles by July 4.

This move escalates a trade dispute over Beijing's subsidies, which Brussels fears are damaging European car manufacturers. The EU intends to impose provisional tariffs ranging from 17.4% to 38.1% on EVs from China for four months starting on July 4. This is in addition to the 10% duties applied to all imported EVs.

These tariffs would affect vehicles exported to Europe by both Chinese and foreign brands, including Tesla. The European Commission, the executive arm of the EU, stated that preliminary findings from an investigation into Chinese EV subsidies revealed that the country's battery electric vehicle "value chain" benefits from "unfair subsidisation" that negatively impacts EU competitors.

Commerce Minister Wang Wentao held a video conference with European Commission Executive Vice President and Trade Commissioner Valdis Dombrovskis, as announced by the Chinese Commerce Ministry on its website on Saturday. "The two sides agreed to launch consultations on the EU's anti-subsidy investigation into Chinese electric vehicles," it said.

"The doors are open for discussions. And I hope that this message was heard," said Germany's economy and vice chancellor, Robert Habeck, during his trip to China on Sunday. Tensions escalated as China's Commerce Ministry lambasted the EU on Thursday, declaring its probe into Chinese electric vehicle imports as skewed by unreasonable demands, leading to a decision to hike tariffs by up to 38%.

Spokesperson of the ministry, He Yadong, criticised European investigators for requesting excessive data from Chinese car producers, subsequently accusing them of non-cooperation. Despite last week's announcement from Beijing of an anti-dumping inquiry targeting European pork exports, no mention of EV tariffs surfaced; however, this move was broadly interpreted as a counterstrike against the EU's electric car tariff stance.

Meanwhile, European representatives have expressed a desire to engage with China over the investigative findings in hopes of reaching mutual resolution over the contentious trade matters.