China suggests 25% car tariff as EU probe deadline looms

(Bloomberg) — China signaled its willingness to slap tariffs of up to 25% on imported cars with big engines as trade tensions with the U.S. and European Union escalate.

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The China EU Chamber of Commerce said it was informed of the possible move by insiders, according to a statement posted on X. The tariffs would affect European and US carmakers and have a significant impact on relations with the EU. -in, she added.

Beijing is stepping up threats of retaliation as a deadline approaches for the EU to announce the results of its investigation into China’s electric vehicle subsidies. The bloc must inform Chinese exporters if it intends to impose tariffs by early June, and they could take effect a month later, according to Eurasia Group.

Trade tensions between the EU and China have risen since the EV investigation was announced, with President Xi Jinping’s visit to Europe this month apparently doing little to ease the strain. Xi was seeking to persuade the bloc to follow the same path as the US, which has unveiled a comprehensive set of tariffs on imports from China, raising concerns in Beijing that US allies could follow suit.

China’s retaliatory trade probes and warnings are not deterring the EU, Eurasia Group analysts wrote in a note on Tuesday. Brussels is keen to send a strong signal to Beijing with its EV investigation that the EU will oppose Chinese subsidies and overcapacity.

The China Chamber referred to an interview published by the ruling Communist Party’s Global Times newspaper on Tuesday, in which Liu Bin, a top expert at the China Automobile Research and Technology Center, called for a temporary increase in the tariff on cars with engines larger than 2.5 liters. .

China imported 250,000 cars in that group last year, and World Trade Organization rules would allow a tariff of up to 25%, the report quoted Liu as saying. The current tariff on passenger car imports from Europe is 15%, according to the Commerce Ministry’s tariff search page. The ministry did not respond to a request for comment.

The carmakers most affected will be Toyota Motor Corp., Mercedes-Benz Group AG and BMW AG, said Daniel Kollar, head of consultancy Intralinks’ automotive and mobility practice.

Most of China’s car imports are in the luxury segment, with Porsche, Audi and Range Rover among the top 10 brands in 2023. Bigger-engined models including the GLE SUV and S-Class sedans from Mercedes and Porsche Cayenne SUVs may be affected if the new tariff is implemented.

Toyota’s Lexus brand topped the overall import rankings last year with 180,000 sales, more than a fifth of the total. If Beijing decides to apply the tariff to all countries, the Japanese company could become collateral damage in trade disputes with the EU and the US.

In addition to cracking down on the car trade, China has recently hinted it may impose taxes on European wines and dairy products and launched an investigation into European brandy exports.

Amid global concern over China’s growing exports, the EV industry is drawing particular attention. China makes more electric cars than anywhere else, and controls most of the battery supply chain. With a price war and a slowing economy at home, its automakers are looking to expand overseas. They exported 1.55 million EVs last year, about 40% of them to Europe.

The Biden administration earlier this month announced 100% tariffs on Chinese electric cars, while the EU is investigating Beijing’s subsidies in a range of industries, which has prompted Chinese firms to pull out of rail and energy tenders.

Some countries and regions have taken restrictive measures in the new energy vehicle sector, which contradict the concept of green development, Liu said in the Global Times interview. Such measures will only harm the interests of their consumers.

(Updates with details on models that may be affected)

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