Last week, the European Union (EU) imposed new tariffs up to 38.1% on Chinese electric vehicles (EVs). The tariffs will go into effect on July 4th if EU and Chinese officials cannot find an “effective solution” to the EU’s claims of non-market practices. This follows the Biden Administration’s decision to impose a 100% tariff on Chinese EVs. The United States and Europe fear the influx of cheap Chinese EVs flooding their automobile markets will prevent domestic companies from being able to compete. For now, Chinese EVs have an 8.2% market share in Europe but this is projected to increase to 20% by 2027.
China’s Commerce Ministry and its chamber of commerce in the EU criticized the announcement. It said, “The EU has disregarded the facts and WTO rules, ignored China’s repeated strong opposition, ignored the appeals and dissents of many EU member governments and industries, and has acted unilaterally. China is highly concerned and strongly dissatisfied with this, and the Chinese industry is deeply disappointed and firmly opposed to this.” In retaliation, Beijing started an anti-dumping investigation in pork imports from the EU. China’s state-run media has also suggested a possible 25% tariff on imported cars with large engines.
The EU’s tariffs will not completely bar the EVs from the bloc and the low-cost Chinese EVs may still be profitable in the EU market. Chinese EV companies are also looking to open facilities in EU countries, which would allow them to bypass the tariffs completely.
The United States called the tariffs an “important step.” National Security Adviser Jake Sullivan said, “as we head into our first sessions here in Italy [for the G7 leaders’ summit], we think this kind of alignment is what we’re looking to build upon to create a level playing field for our workers and our firms.”
During the G7 leaders’ summit, which took place from June 13th-15th and included a session entitled “Indo-Pacific and economic security,” National Security Adviser Jake Sullivan said that G7 leaders are standing together against China’s overcapacity practices. He said, “[W]e believe that, entering our fourth G7 -- President Biden’s fourth G7 -- G7 leaders are more unified, really, than they’ve ever been, at least in modern memory, on the major issues across the board, whether that’s geopolitical crises or its challenges related to the global economy, including issues like Chinese overcapacity.”
The G7 is also working through its Partnership for Global Infrastructure and Investment (PGI), a counter to China’s Belt and Road Initiative, to provide infrastructure financing to the Global South. Sullivan emphasized the importance of the PGI’s work to “advance our own supply chains and national security and our work to outcompete China.”
The G7’s joint statement post-summit was much more aggressive towards China than previous iterations, particularly for its support of Russia. The statement read:
“We express our deep concern at the People’s Republic of China’s support to Russia. We call on China to press Russia to stop its military aggression and immediately, completely and unconditionally withdraw its troops from Ukraine. We encourage China to support a comprehensive, just and lasting peace based on territorial integrity and the principles and purposes of the UN Charter, including through its direct dialogue with Ukraine. China’s ongoing support for Russia’s defense industrial base is enabling Russia to maintain its illegal war in Ukraine and has significant and broad-based security implications. We call on China to cease the transfer of dual-use materials, including weapons components and equipment, that are inputs for Russia’s defense sector.”
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