Tariffs on Chinese EVs Can Still Be Avoided, Former and Current EU Officials Say

As EU member states prepare to vote this week on new tariffs for Chinese electric vehicles, a German trade official and auto industry representative said they believe the EU and China can still reach a “political” agreement to work through their issues and avoid the punitive duties, which they say would harm EU consumers and European car manufacturers that have factories in China.

Robert Habeck, Germany’s minister for economic affairs, declined to say whether Germany will vote for or against the tariffs during a member state vote planned for Oct 4. Although he acknowledged that “tariffs might, in some cases, be necessary,” he said the EU needs a “political solution here” to avoid spiraling toward a trade war with Beijing.

“I would agree with everyone who says that tariffs are not the answer,” Habeck said this week at the annual Berlin Global Dialogue.

The EU reportedly has enough countries to vote in favor of the new countervailing duties (see 2408200020), which could be published in the Official Journal of the EU by the end of October. But even if the bloc votes to approve the tariffs, Habeck said he still believes that one-month window is enough time to negotiate an alternative solution with China.

“I'm asking the EU to be open for this discussion,” he said. “Two days is a long time, and one month is a really long time. So if everyone wants to contribute, of course it's possible to find common ground there.”

Ola Kallenius, CEO of the Mercedes-Benz Group, also said he believes the two sides can find a way to avoid the tariffs, calling one month “an eternity.”

“I believe there is a better solution,” he said. “The minister alluded to it. Straight tariffs is a very crude instrument to use. There are many other ways if there is political will to make sure that the playing field is level.”

He noted that Mercedes has “large operations” in China, and new tariffs could hurt its sales of cars that it exports from China to Europe. “I'm scratching my head, thinking to myself, what do they want to do? Do they want to destroy my business model and make it economically not viable?” Kallenius said. “I cannot get the math to compute for us as a manufacturer in China exporting to Europe.”

The planned EU vote comes days after Chinese Commerce Minister Wang Wentao met with EU officials, including Germany, to lobby against the new tariffs (see 2409200013 and ​​2409190013). Habeck said those talks proved that China is open to negotiating, saying Beijing “made a proposal to solve this conflict politically.”

But he also stressed he still has “doubts” about whether China will actually stop subsidizing its companies in a way that undercuts the competitiveness of EU firms. He said Germany has “problems” with Chinese fashion companies Temu and Shein, which are able to sell clothes at prices lower than local companies.

“The question is, do they get the capacity for exported products by a level playing field, or is it a subsidized, overcapacity for exports? And if that would be the case, then we have a problem,” he said. “So there is reason for distrust, in a way.”

Cecilia Malmstrom, a former EU trade commissioner, said it’s “not easy to see a quick solution,” noting that there’s “political pressure from many countries” to impose the tariffs because their car companies feel they can’t compete with Chinese EVs.

But while it’s “clear” that China is unfairly subsidizing its EV industry, “I don't think the tariffs are the right solution right now,” Malmstrom said. “I don't think it will help European industry.” She expects talks between the two sides to continue this month even though she believes the EU will vote to impose the tariffs this week.

“Can Europe find a solution? Can there be minimum prices” for Chinese EVs in Europe? Malmstrom said. “We need to have the discussion within the European car industry, not only in Germany, but also all over the continent.”

Kallenius said he believes China genuinely wants to find a solution because it doesn’t “have an interest to get into any kind of escalating trade conflict with Europe,” similar to “what's going on with the United States.” The U.S. announced a 100% tariff on Chinese EVs earlier this year (see 2409130006).

Habeck made similar points and said he’s concerned about a rise in global trade barriers. He pointed to the U.S. tariffs as well as similar auto duties from Brazil, India and Turkey.

“There are local content rules all over the place, happening everywhere,” he said. “I wouldn't say that globalization is over, but the belief, maybe the naive belief, that an open world where trade is bringing countries together has definitely come to a new phase.”