EU states greenlight extra tariffs on EVs from China

EU countries on Friday approved hefty additional tariffs on electric cars made in China, despite strong opposition led by Germany and fears the move will spark a trade war with Beijing.

The European Commission – which provisionally approved the step in June after an inquiry found that Beijing's state aid to auto manufacturers was unfair – now has free rein to impose steep tariffs for five years from end October.

Ten member states including France, Italy and Poland supported imposing the tariffs of up to 35.3 percent, coming on top of existing duties of 10 percent, European diplomats told AFP.

Only five including Germany and Hungary voted against while 12 abstained including Spain and Sweden.

Although the tariffs did not win support from a majority of states, the opposition was not enough to block them – which would have required at least 15 states representing 65 percent of the bloc's population.

That leaves the choice on moving ahead in the hands of the European Commission which "can be expected to decide in line with its proposal", an EU diplomat said.

China has slammed the new tariffs as "protectionist" and warned they would trigger a trade war.

France vs Germany

The extra duties also apply, at various rates, to vehicles made in China by foreign groups such as Tesla – which faces a tariff of 7.8 percent.

Brussels says it aims to protect European carmakers in a critical industry that provides jobs to around 14 million people across the European Union but does not benefit from hefty state subsidies like in China.

Canada and the United States have in recent months imposed much higher tariffs of 100 percent on Chinese electric car imports.

The EU duties have pitted France and Germany against each other, with Paris arguing they are necessary to level the playing field for EU carmakers against Chinese counterparts.

But Germany, renowned for its strong auto industry and its key manufacturers including BMW, Volkswagen and Mercedes heavily invested in China, says the EU risks harming itself with tariffs, and has urged for negotiations with Beijing to continue.

In an indication of fears spreading in Europe, Spanish Prime Minister Pedro Sanchez reversed course and asked Brussels last month to "reconsider", despite Madrid's initial support.

EU's tightrope

Hungary has also been vocal in its opposition and before the vote, Prime Minister Viktor Orban lambasted the tariffs as "the next step in the economic cold war".

Beijing has threatened to retaliate forcefully and has already opened probes into European brandy, dairy and pork products imported into China.

China tried in vain to stop the duties, hoping to resolve the issue through dialogue, but talks have so far failed to lead to an agreement that satisfies the EU.

The commission has said that any duties could be lifted later if China addresses the EU's concerns.

Trade tensions between China and the EU are not limited to electric cars, with inquiries launched by Brussels also targeting Chinese subsidies for solar panels and wind turbines.

The bloc faces a difficult task as it tries to foster its clean tech industry and invest in the green transition without sparking a painful trade war with China.