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EU automakers slip as China threatens retaliatory tariffs on luxury cars

The Chinese tariff threats come as the US, EU ready China-made EV duties.

The Chinese government threatened retaliatory tariffs on imports of European Union and US-made vehicles following both the EU’s move to investigate Chinese EV subsidies and the White House’s tariff escalation on Chinese-made goods.

In a post on X, the China Chamber of Commerce to the EU (CCCEU) said it was “informed by insiders that China may consider increasing temporary tariff rates on imported cars equipped with large-displacement engines.”

The CCCEU cited a Global Times interview with China’s chief automotive strategy expert claiming the temporary tariff rate could be raised to a maximum of 25%.

The current duty rate for vehicles imported into China is 15%.


Shares of European luxury automakers like Mercedes-Benz, BMW, Tata Motors (Jaguar Land Rover parent), and Volkswagen Group (Audi parent) all traded lower on Wednesday, as those automakers export vehicles with large-displacement engines to China.

The Chinese tariff threat comes after the European Commission — the executive arm of the EU bloc of countries — initiated an investigation back in October over allegations that Chinese government subsidies were deflating the prices of Chinese-made EVs imported into EU member countries and thereby violating the WTO (World Trade Organization) anti-dumping agreement.

The deadline for the Commission to impose duties is July 4, nine months after the investigation began. Commission trade chief Valdis Dombrovskis told Politico the investigation was “advancing” earlier this month.

Last week President Joe Biden unveiled new tariffs on a slew of Chinese-made products, with tariff rates on EVs from companies like BYD (BYDDY), Geely (GELYF), and NIO (NIO) set to quadruple to 100% from 25% of the cost of the vehicle.

Earlier on Wednesday, the office of the US Trade Representative posted a notice that the 30-day public comment period for the tariffs will begin on May 29 and close on June 28. The tariffs themselves on EVs and other goods will begin as early as Aug. 1.

BEIJING, CHINA - APRIL 25: Mercedes-Benz electric G-Class SUV is on display during the 2024 Beijing International Automotive Exhibition (Auto China 2024) at China International Exhibition Center on April 25, 2024 in Beijing, China. (Photo by VCG/VCG via Getty Images)
Mercedes-Benz electric G-Class SUV is on display during the 2024 Beijing International Automotive Exhibition on April 25, 2024, in Beijing, China. (VCG/VCG via Getty Images) (VCG via Getty Images)

While the sales of Chinese EVs in the US are quite small relative to other goods, the imposition of tariffs is an escalation of the “US-China Cold War,” and China is, not surprisingly, threatening to escalate against both the US and the EU.

The calculus for European automakers operating in China is complicated by the fact that the brands count on the Chinese market for sales of luxury cars made in Europe while also seeking protection from Chinese brands in their own domestic markets.

Automotive data firm Motor Intelligence reports Chinese buyers purchased 3.09 million premium luxury vehicles from European automakers in 2022, up 6% from the prior year. Motor Intelligence estimates the China luxury car market will hit $154.7 billion in 2024 and then grow to $181.5 billion by 2029.

Interestingly, some brands like Audi, which has a big presence in China, are increasingly working with local brands to penetrate the highly competitive EV market too.

On Monday, Audi announced it had signed a deal with China's state-owned SAIC to develop new EVs for the Chinese domestic market. Audi said the SAIC deal would begin with three new EV models, with the first EV entering the market in 2025.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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