23rd May 2024 – (Beijing) China’s Ministry of Commerce (MOFCOM) has strongly criticised the potential restrictive measures being considered by certain countries and regions against Chinese electric vehicles (EVs). This response comes in the wake of reports suggesting that a prominent Chinese expert has called for a temporary tariff hike on imported cars with large engines, a move that could significantly impact auto imports from the United States and the European Union.

The U.S. and the EU have recently intensified their crackdown on Chinese EVs and other new-energy products, with Washington setting a date for imposing tariff increases on a range of Chinese goods and actively pressuring its allies, particularly the EU, to follow suit. Chinese officials have repeatedly vowed to take all necessary measures to defend the nation’s interests, and experts believe that China will undoubtedly take countermeasures when the US and the EU implement their tariff moves, although the specific measures and their scope remain uncertain.

At a press briefing on Thursday, MOFCOM spokesperson He Yadong reaffirmed China’s unwavering commitment to green and low-carbon development, emphasising the country’s consistent encouragement and support for the green and low-carbon transformation and upgrading of various industries to achieve high-quality development. He further highlighted the ongoing research by experts across all sectors, including the auto industry, on China’s green development path and their recommendations for tackling global climate change.

The suggested move to raise temporary tariff rates on cars with engines larger than 2.5 liters, as part of a broad effort to promote green development, has been widely interpreted by Western media outlets as Beijing’s response to Washington’s tariff hikes on Chinese EVs and the EU’s anti-subsidy probe into Chinese EVs. However, He Yadong slammed the restrictive moves against Chinese EVs, stating that some countries and regions are currently deviating from the concept of green development, violating the principles of the market economy and WTO rules, and introducing restrictive measures in the field of new-energy vehicles. Such moves, he argued, will only harm the interests of their own consumers and undermine the global green transition and the world’s capacity to tackle climate change.

The U.S. announcement on Wednesday that it will start imposing increased tariffs on an array of Chinese products, including EVs, EV batteries, semiconductors, and medical products on 1st August, has been met with strong opposition from Chinese experts. They maintain that China will not sit idly by if its legitimate rights and interests are harmed by other countries and will undoubtedly take countermeasures to defend its rights and interests, just as it did in 2018 when the U.S. launched a tariff war against China.

Gao Lingyun, an expert from the Chinese Academy of Social Sciences, said that China will fight back, although the specific measures and scope remain to be seen. Chinese experts suggest several steps that China can take in a proportionate manner, in line with international trade rules, such as filing a complaint with the WTO and supporting relevant firms in filing lawsuits against the U.S. However, they acknowledge that such moves are unlikely to resolve the issues in the short term, and other countermeasures must also be prepared.

The negative impact of Washington’s moves on global green, low-carbon development and efforts to tackle climate change has also raised serious questions about its commitment to the area, and experts suggest that relevant cooperation should be reviewed. US officials have been stepping up pressure on allies, including the EU, to follow suit in cracking down on Chinese EVs, with Brussels launching an anti-subsidy investigation that could lead to hiked tariffs. However, Chinese experts note that U.S. allies have different interests to consider when it comes to taking harmful measures, even though they are under great pressure to heed the U.S.’ commands.

The greatly intertwined interests between China and the EU in the car industry, with many Chinese car exports containing EU components or technologies, mean that EU companies also profit from China’s car exports. As a result, any move taken by EU authorities will likely be temporary and limited in scope. Moreover, temporary adjustments on tariffs on large-engine cars could have a major negative impact on EU carmakers, as many luxury sedans and sports utility vehicles with engines larger than 2.5 litres in China are imported from EU countries like Germany.

It is crucial to be wary of oversimplified narratives surrounding the Biden administration’s plans to raise tariffs on Chinese EVs from 25% to 100%. President Biden’s accusation of Beijing “cheating” through subsidies for its domestic EV industry is arguably hypocritical, as the United States is pursuing its own industrial policy strategy. The notion that EV tariffs prove President Biden’s lack of concern for the climate is misguided; rather, he is likely concerned that domestic climate progress will stall if it contributes to the collapse of the U.S. auto industry.

The Biden administration’s proactive measures aim to create a defensible moat to protect U.S. automakers’ efforts to build competitive EVs from being wiped out by Chinese imports. The dangers are real, as evidenced by the ascendancy of Chinese manufacturing over the past 25 years, which has had massive economic and political consequences in U.S. manufacturing towns. A deluge of cheap Chinese EV exports is a predictable risk, given China’s manufacturing capacity vastly outpaces domestic demand.

The United States must balance three competing goals: achieving rapid decarbonisation, avoiding the rapid loss of high-quality auto jobs, and allowing American consumers access to low-cost, high-quality EVs. However, indefinite tariffs could lead to stagnation and constrain economic growth and climate progress alike. The best option for the U.S. is strong, temporary, and conditional support for the domestic EV industry, paired with broader policies and partnerships with leading global EV technology firms, even if they are Chinese.