The EU Joins the EV Trade War

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China’s electric vehicle (EV) manufacturing industry is the world’s largest, fastest-growing, and most technologically advanced—and the nation’s rapid increase in EV exports continues to spark protectionist backlash. Earlier this month, the EU officially joined the increasingly wide-ranging trade war against China’s EV industry when the European Commission voted to approve high tariffs on the vehicles after a year-long anti-subsidy investigation. The tariffs, which have been in place provisionally since July, are not as large as the 100% duties that America placed on Chinese EVs earlier this year, but still reach as much as 38% on certain manufacturers and could persist for as long as half a decade.

Yet when the US announced its tariffs on Chinese EVs, that was not a major change to the status quo—long-standing DC policy has been to functionally ban all Chinese-made EVs, the increased tariffs just reinforced that already-existing ban. Not so in the EU, where China has rapidly become the bloc’s largest source of imported EVs and has been steadily outcompeting many domestic automakers. In the twelve months before the start of the antisubsidy investigation, the EU imported more than €11.3B worth of Chinese EVs, while China bought only a paltry €1.36B worth of European EVs.

Indeed, the boom in Chinese EV production has rapidly shaved down the EU’s long-standing vehicle trade surplus—the bloc’s total net automobile exports to China stood at €16.9B in 2022, but they have fallen to only €5.1B over the last twelve months. That reduction has come both via a massive increase in net EV imports from China plus a significant decrease in net internal-combustion engine (ICE) exports to China. Thus, the tariffs hope to restore the EU’s vehicle trade surplus by cutting into the growth of Chinese EV imports, which have already decreased since the antisubsidy investigation began and preliminary tariffs were implemented.

Yet the EU was far from unified on the move to more permanent tariffs, with the bloc’s weak economic standing and the threat of Chinese retaliation making the possibly-substantial economic costs tough to swallow. Germany—the continent’s largest economy, one of the world’s leading car manufacturers, and a country with deep industrial ties to China—abstained on the provisional tariffs but voted no on the final proposal after intervention from Chancellor Olaf Scholz. For