The Government of China has officially filed a complaint before the World Trade Organization (WTO) against the European Union for charging tariffs on electric vehicles (EVs) produced in Chinese territory. The August 9, 2024, announcement by China’s Commerce Ministry is a further twist in the countries’ battle over the dominance of fast-growing electric vehicle (EV) sales.
Last month, the EU levied provisional tariffs of up to about 37.6% on Chinese-made EVs due in part to what it described as unfair government subsidies for manufacturers based there. If they are not, the tariffs would take effect in early November.
China insists the way it has supported its EV industry is compliant with WTO regulations. The Commerce Ministry said China had taken recourse to the WTO dispute settlement mechanism “to protect its electric vehicle industry and cooperation on global green transformation.
It further claimed that the EU measures not only run counter to actual WTO trading principles but also would hurt global cooperation in combating climate change and other important international issues.
The complaint came at a time when China’s auto industry is experiencing relatively tepid performance. Passenger car exports increased in July 2024 on an annual basis, while domestic sales registered a decrease, according to a recent report by the Turkish Industry Association.
Already, ominous signs have emerged of a brewing conflict. China reacted by launching probes into French cognac and European pork. Analysts caution that the back-and-forth moves could escalate into a wider and economically bruising trade war between China and the EU.
The EV segment has emerged as a major focus of geopolitical competition, underscoring the sector’s growing role in automotive worldwide and attempts to address climate shifts. The EU tariffs have been presented by China, the world’s largest and most important EV market, as well as one of its biggest producers, as an existential challenge to growing a self-supporting industry that can compete globally.
The WTO complaint process now affords both sides until early November to try and resolve their differences through consultations. If a resolution is not produced, the case will proceed to an arbitration panel.
The debate can also be placed in the broader context of an economic interest-industrial policy-environmental goal nexus inherently at play as the world moves towards a future dominated by electric vehicles. Given that both China and the EU have ambitions to be global leaders in EVs, it will not be trivial to find an equitable balance between fair competition and supporting home industries.
A WTO ruling against China in this case could have significant ramifications for the global EV market going forward, trade relations among nations, and efforts to combat climate change with the expanded use of electric cars.