TMTPost -- China proposes lowering certain car tariffs that are favorable for German auto giants to appeal the largest economy of the Europe to help avoid the upcoming risk of electric vehicle (EV) tariffs, according to a recent report.


Credit：Xinhua News Agency

China floated lowering its existing tariffs on large-engine cars in return for scrapping planned EV levies on imports from the Asian nation, Bloomberg reported on Monday, citing people familiar with the discussion. According to the sources, Chinese Commerce Minister Wang Wentao hinted at the possibility of the advantages to German Vice Chancellor Robert Habeck during a meeting on Saturday in Beijing.

China stands ready for dialogue and consultations on EVs if the EU is willing to sit down at the negotiating table with sincerity, according to a press release of The Ministry of Commerce of China (MOFCOM) . China is willing to consider both parties' reasonable concerns to avoid the escalation of trade frictions in a rational and professional manner, Wang told Habeck, who travelled to China last weekend.

If the European side stubbornly insists its wrong way, China will take necessary measures, including lodging a case under the World Trade Organization (WTO) dispute settlement mechanism, to firmly defend its legitimate rights and interests, Wang cautioned.

Habeck said the German government is deeply concerned about the EU's anti-subsidy investigation into Chinese EVs, which will negatively impact Europe's green transition and consumer interests, according to Chinese commerce ministry. The official, who also serves as the Minister for Economic Affairs and Climate Action, believes that imposing tariffs is the worst approach as it could lead to a vicious spiral of trade friction escalations, stressing that dialogue and consultations are the only way to solve problems.

The European Commission said on Monday it would host technical talks with Chinese officials in Brussels this week. "The EU side has emphasised that any negotiated outcome of the investigation must be effective in addressing the injurious subsidisation," Reuters cited a Commission spokesperson that day.German Chancellor Olaf Scholz said there needed to be "serious movement and progress" from China too.

The European Commission said on June 12 that it has pre-disclosed the level of provisional countervailing duties it would impose on imports of battery electric vehicles (BEVs) from China, which would be introduced from July 4 if discussions with Chinese authorities do not result in an effective solution. The executive arm of the EU concluded through an anti-subsidy investigation that the BEV value chain in China benefits from unfair subsidization, which is causing a threat of economic injury to EU BEV producers.

If the abovementioned duties are materialized, the European Commission would impose additional duties on three sampled Chinese EV makers, on top of the ordinary BEV import duty of 10%. The additional individual duties would be 17.4% for BYD, 20% for Geely and 38.1% for SAIC. According to the statement, other BEV producers in China, which cooperated in the investigation but have not been sampled, would be subject to the following weighted average duty: 21%, while all other BEV producers in China would face an extra duty of 38.1% if they did not cooperate in the investigation.

European auto behemoths criticized the upcoming extra tariffs right after the European Commission’s announcement. BMW CEO Oliver Zipse said the European Commission’s planned tariffs were the wrong way to go for the tariffs will harm European companies and interests of the continent.

BMW and its Europe-based peers might also suffer a hit from China as Beijing was reportedly consider new tariff move on car imports. China is promoting introduction of procedures related to tariff hike on gasoline cars with large displacement engine, more exactly, gasoline cars powered by engines larger than 2.5 liters, according to an article posted by Yuyuan Tantian, a social media influencer affiliated with state broadcaster China Central Television (CCTV), citing insiders of China’s auto industry on Thursday. The article quoted estimates from the China Passenger Car Association (CPCA) that annual European exports of such large displacement engine-powered passenger car has reached US$18 billion, outweighing Chinese EV exports to the Europe last year.

If China raises provisional tariff rate of the abovementioned vehicles, European brands such as BMW and Mercedes-Benz will be the first to be affected, which means that European automobile exports to China will suffer a blow, Yuyuan Tantian wrote. The domestic auto industry calls for hike tariff on such vehicle imports to 25%, and the new tariff rate, if Beijing decides to impose, will be within the scope of China's commitment to the World Trade Organization (WTO) and does by any means contradict the WTO rules, Cui Fan, professor in International Trade, School of International Trade and Economics (SITE) of the University of International Business and Economics (UIBE), told Yuyuan Tantian.