The spat over EVs is part of a wider trade dispute over Chinese state support for green technologies.

The European Union will hike tariffs on Chinese electric vehicles (EVs) on July 4, unless Beijing fail to agree a “solution” to subsidies that the bloc says are distorting its markets.

The European Commission said on Wednesday that it would raise tariffs on Chinese carmakers to 38 percent, up from the current level of 10 percent, on July 4, unless talks with China can resolve the subsidies issue. The argument over EVs is the latest in a series of trade spats between the EU and Beijing, especially focusing on green technologies.

In a press release, the EU executive said it has reached out to Chinese authorities to discuss the findings of its investigation into the subsidies and “explore possible ways to resolve the issues”.

The new import duties will apply from July 4 “should discussions with Chinese authorities not lead to an effective solution”, it said.

The EU’s action was widely expected amid an investigation into China’s state support for its automakers, who have taken advantage of the 10 percent tariff, which is significantly lower than that imposed by the likes of the US or India.

The commission believes Chinese-built EVs are 20 percent cheaper than their European counterparts and that has helped imports – including vehicles from Western brands like Tesla and BMW that have car plants in China – into the EU skyrocket in recent years, rising from 57,000 units in 2020 to more than 437,000 in 2023, according to the EU’s statistics body Eurostat.

The EU says Chinese brands, including BYD and SAIC, are also increasing market share as Beijing’s massive subsidies help them undercut European brands on price.

Wider spat

The spat over EVs is just the latest in a broader trade dispute over what the EU says is China’s unfair state support for green tech exports that also include solar panels, batteries and wind turbines.

Reflecting that ongoing discussion, and the wide expectation regarding the probe, some took the commission’s announcement in their stride.

Cui Dongshu, secretary-general of the China Passenger Car Association, said: “The EU’s provisional tariffs come basically within our expectations, which won’t have much of an impact on the majority of Chinese firms.”

Chinese electric vehicle maker Nio said that while it strongly opposes the move, its commitment to the EV market in Europe remains unwavering.

However, the announcement was met with consternation in some quarters, including Germany, home to the EU’s largest automotive sector.

Germany’s transport minister warned that the EU’s threatened tariff hike risked a “trade war” with Beijing.

“The European Commission’s punitive tariffs hit German companies and their top products. Cars must become cheaper through more competition, open markets and significantly better business conditions in the EU, not through trade war and market isolation,” Volker Wissing said on X.

“As an exporting nation, what we do not need are increasing barriers to trade. We should work on dismantling trade barriers in the spirit of the World Trade Organisation,” added Ola Kaellenius, CEO of German carmaker Mercedes Benz.