EU slaps new tariffs of up to 35.3 percent on Chinese electric vehicles

The EU on Tuesday decided to slap hefty tariffs on Chinese-made electric cars after an anti-subsidy probe concluded Beijing's support undercut European automakers.

The extra taxes have been controversial, with strong opposition from Germany and Hungary amid fears of provoking China's ire and setting off a bitter trade war.

Beijing previously slammed the European Union's "unfair, non-compliant and unreasonable protectionist practices" during the probe.

"By adopting these proportionate and targeted measures after a rigorous investigation, we're standing up for fair market practices and for the European industrial base," EU trade chief Valdis Dombrovskis said in a statement.

"We welcome competition, including in the electric vehicle sector, but it must be underpinned by fairness and a level playing field," he said.

But Germany's main auto industry group was unhappy, warning the tariffs heighten the risk of "a far-reaching trade conflict".

The duties will come on top of the current 10 percent on imports of electric vehicles from China.

The decision will become law after publication in the EU's official journal, which is expected later on Tuesday or Wednesday, and enter into force no later than Thursday, an EU official said.

Brussels' probe found that China's state subsidies were unfairly undercutting European automakers.

Once they come into effect, the tariffs will be definitive and last for five years.

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.

Chinese car giant Geely -- one of the country's largest sellers of EVs -- faces an extra duty of 18.8 percent.

Ailing companies

The tariffs do not have the support of the majority of the EU's 27 member states but in a vote early this month, the opposition was not enough to block them - which would have required at least 15 states representing 65 percent of the bloc's population.

The EU launched the probe in a bid to protect its automobile industry, a major industrial player that provides jobs to around 14 million people.

France, which pushed for the investigation, welcomed the decision.

"The European Union is taking a crucial decision to protect and defend our trade interests, at a time when our car industry needs our support more than ever," French Finance Antoine Armand said in a statement.

But Europe's bigger carmakers, including German auto titan Volkswagen, have criticised the EU's approach and have urged Brussels to resolve the issue through talks.

The extra tariffs are "a step backwards for free global trade and thus for prosperity, job preservation and growth in Europe," the German Association of the Automotive Industry's president Hildegard Mueller said on Tuesday after the announcement.

Volkswagen, which has been hit hard by rising competition in China, has previously said the tariffs would not improve the competitiveness of the European automotive industry.

That warning came weeks before the ailing giant announced plans on Monday to close at least three factories in Germany and cull tens of thousands of jobs.

On Tuesday, Audi, a subsidiary of crisis-hit Volkswagen, announced its intention to stop production of electric vehicles at an embattled factory in Brussels at the end of February next year.

Talks continue between the EU and China and the duties can be lifted if they reach a satisfactory agreement, but officials on both sides have pointed to gaps and differences.

"We remain open to a possible alternative solution that would be effective in addressing the problems identified and WTO-compatible," Dombrovskis said, referring to the World Trade Organization.

Retaliatory moves

The EU now faces China's retaliation. China already said on October 8 it would impose provisional tariffs on brandy imported from the EU.

Beijing has also launched probes into EU subsidies of some dairy and pork products imported into China.

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

The EU is not alone in levying heavy tariffs on Chinese electric cars.

Watch moreCan Europe get up to speed? Turbulent switch to electric vehicles

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

(AFP)