Germany Cautions Trade War following EU Vote for China EV Tariffs

TMTPost -- Berlin and the German auto giants reiterated their stance against the upcoming definitive tariffs on the electric vehicle (EV) imports from China for five years following a key vote among the European Union members that pushed forward tariffs.

Credit：Xinhua News Agency

Germany's finance minister, Christian Lindner warned against triggering a trade war with China. "The EU Commission of Ursula von der Leyen should not trigger a trade war despite the vote in favour" of the tariffs, Lindner said on the social media platform X, adding "We need a negotiated solution."

Volkswagen Group, the biggest automaker of Europe, said the extra duties "were the wrong approach and would not improve the competitiveness of the European automotive industry." It called on the EU and China to continue talks with the aim of a "political solution" before the new tariffs come into effect at the end of October. "The common goal must be to prevent any countervailing duties and thus a trade conflict," said the German company.

The tariffs were a "fatal signal for the European automotive industry", said Oliver Zipse, CEO of German luxury carmaker BMW, calling for a "quick settlement" between the EU and China. But he added: "The fact that Germany voted against the tariffs is an important signal and increases the chances for a negotiated settlement."

Volkswagen and BMW’s German peer Mercedes-Benz said the tariffs were a "mistake", urging the European Commission to delay their implementation to allow further talks about a deal.

Netherlands-based Stellantis NV expressed its stance to defend free and fair trade Friday. "As a global company, we support free and fair competition. Our industry is under the pressure of ambitious CO2 reduction plans and the Chinese global commercial offensive," said the world’s fourth largest automaker by sales last year. It added that "during this time of transition, policies supporting the demand and ensuring stability of the rules are more important than ever".

Comments of the carmakers came on heel of a make-or-break vote that cleared hurdles for the EU to introduce up to 45% definitive tariffs through an anti-subsidy investigation initiated October 2023. The European Commission announced Friday its proposal to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China has obtained the necessary support from EU Member States for the adoption of tariffs.

The European Commission didn’t specify how the EU governments voted on the Chinese EV tariffs Friday. Reuters cited a source close to the matter that 10 EU members are in favor of tariffs and five voted against, with 12 abstentions. It is reported that the members backed tariffs include Bulgaria, Denmark, Estonia, France, Ireland, Italy, Latvia, Lithuania, Netherlands and Poland. Germany, the top economy and major car producer of the region, Hungary, Malta, Slovenia and Slovakia reportedly opposed hiking the tariffs. Austria, Belgium, Croatia, Cyprus, Czech, Finland, Greece, Luxembourg, Portugal, Romania, Spain and Sweden declined to vote either for or against higher tariffs, according to the Reuters report. A Bloomberg report echoed the aforementioned divided vote.

The European Commission said on July 4 it imposed provisional countervailing duties of up to 37.6%, on top of the ordinary BEV import duty of 10%, on imports of BEVs from China. The regulatory body proposed to add up to 35.3% to the current 10% duty faced by Chinese exporters. Since a qualified majority of 15 EU members completed, the proposed definitive tariffs are set to go into effect from next month for five years.

In the meantime, the EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission's investigation, monitorable and enforceable, said the European Commission.