European Union countries failed to agree on whether to slap China-made electric vehicles (EVs) with steeper tariffs during a closely watched vote that ended with too many abstentions, forcing the European Commission to overcome the political impasse and push its proposal over the finish line.
The outcome of Friday's vote was not publicly available, although several diplomats told Euronews how each member state positioned itself:
- 10 were in favour: Bulgaria, Denmark, Estonia, France, Ireland, Italy, Lithuania, Latvia, the Netherlands and Poland. (45.99% of the EU population)
- 12 abstained: Belgium, the Czech Republic, Greece, Spain, Croatia, Cyprus, Luxembourg, Austria, Portugal, Romania, Sweden and Finland. (31.36%)
- Five were against: Germany, Hungary, Malta, Slovenia and Slovakia. (22.65%)
The high number of abstentions reflects long-standing qualms about how Europe should stand up to China. Although the political consensus says that Beijing's unfair trade practices merit a forceful, united response, threats of commercial retaliation appear to have dampened the resolve of many capitals as the make-or-break date neared closer.
It was up to the Commission, which has exclusive powers to set the bloc's commercial policy, to break the gridlock and ensure the duties go through.
Given the Commission's serious concerns about China's extensive use of subsidies to promote domestic producers and allow them to sell their EVs at an artificially low price in global markets, the conclusion is far from surprising.
The executive had previously warned that, without taking forceful action, EU carmakers would suffer unsustainable, possibly irrecoverable losses and be pushed out of the lucrative market of net-zero mobility, with painful consequences for 2.5 million direct and 10.3 million indirect jobs across the bloc. The bloc's industry is already in turmoil due to high energy prices, sluggish consumer demand and fierce global competition.
The extra tariffs are designed to offset the damaging effects of the subsidies and close the price gap between Chinese and EU firms. They vary according to the brand and their level of cooperation with the Commission's investigation:
- Tesla: 7.8%
- BYD: 17%
- Geely: 18.8%
- SAIC: 35.3%
- Other EV producers in China that cooperated in the investigation but have not been individually sampled: 20.7%
- Other EV producers in China that did not cooperate: 35.3%
The duties will likely enter into force on 31 October and last for at least five years.
They will come on top of the existing 10% rate. This means that, in practice, some Chinese carmakers will soon face tariffs of over 45% when they try to bring their goods into the single market.
Beijing and Berlin, the main losers
Friday's resolution is certain to unleash Beijing's fury.
From the onset, China has denounced the Commission's probe as a "naked protectionist act," consistently denied the existence of subsidies, called the findings "artificially constructed and exaggerated" and threatened retaliatory measures against the EU's dairy, brandy and pork industries, setting alarm bells ringing in some capitals.
In parallel, Chinese officials have engaged in intense talks with their EU counterparts to secure a political solution that could avert the additional duties. One possible option is for producers to commit to establishing minimum prices for their electric vehicles, although implementing this solution could prove challenging and vulnerable to loopholes.
Despite Friday's resolution, EU-China negotiations are set to continue.
"We do not and never have wanted to impose tariffs in this case for the sake of imposing tariffs. What we want is to remove the injurious effect of subsidisation," a Commission spokesperson said, insisting that any remedy should be "adequate, monitorable, enforceable" and compatible with World Trade Organization (WTO) rules.
In a notable concession, Brussels has allowed Chinese companies to submit offers of price undertakings (minimum prices) after the internal investigation reaches its 30 October deadline. If these offers are accepted, which is not guaranteed, customs will stop collecting the new duties on the brands that benefit from the measure. Additionally, affected carmakers will be allowed to request a tailored-made rate, as Tesla did.
In a statement, China's Commerce Ministry said the EU actions "seriously violate WTO rules and interference with the normal international trade order" and vowed to "firmly safeguard the interests of Chinese companies," without announcing any retaliation.
"China firmly opposes the EU's draft final ruling but also notes that the EU has expressed its political will to continue to resolve the issue through negotiations," a spokesperson for the Ministry said. "China hopes the EU will clearly realise that imposing additional tariffs will not solve any problems but will only shake and hinder the confidence and determination of Chinese companies to invest and cooperate in Europe."
Talks are also a top priority for Germany, which fears Beijing's tit-for-tat could inflict further pain on its sluggish economy. German companies spent the last two decades expanding their business ties with China as a way to sell their exports to its increasingly wealthy middle class. Any retaliation could hit hard these well-developed links.
The Commission "should not trigger a trade war. We need a negotiated solution," Germany's Finance Minister Christian Lindner said in reaction to the vote.
The fact the tariffs will eventually go ahead lays bare Berlin's diminishing clout in Brussels, where the internal fights inside the three-party coalition have often caused frustration and exasperation among diplomats. The political fiasco could reverberate until the country holds its federal election in September 2025.
By contrast, the approval of duties serves as an endorsement of Ursula von der Leyen's China policy. The Commission chief has won plaudits for her clear-eyed, matter-of-fact strategy to deal with Beijing, closing the chapter on the political complacency that now is blamed for the myriad of critical dependencies the bloc built with China.
The dispute around Chinese EVs marked a rare moment where the president, a German native, defended a position strenuously opposed by her home country.
With the political win under her belt, von der Leyen is well-positioned to continue her policy during her second mandate.
This article has been updated with more information about the vote.