Tariffs on Chinese BEVs and Retaliatory Measures

The European Union is imposing provisional countervailing duties of 21% on imports of battery electric vehicles (BEVs) from China from 4 July 2024. This follows an investigation which found evidence of WTO-inconsistent subsidies for Chinese BEVs. Imports of Chinese vehicles could fall significantly, but electric car prices are unlikely to change much in the long term. 

A policy brief by the Austrian Supply Chain Intelligence Institute (ASCII), the Kiel Institute for the World Economy (IfW Kiel) and the Austrian Institute of Economic Research (WIFO) assesses the impact of these tariffs. The results, based on simulations of a trade model (the KITE model), show that imports of motor vehicles from China are expected to fall by 42% as a result of the provisional countervailing duties. This decrease will be largely offset by increased sales by European producers in the EU and partly by increased imports from third countries. Car prices are expected to be only slightly affected in the long term. Prices of electric cars could increase by 0.3% to 0.9% on average in the EU, while they would decrease in China. Value added in the automotive industry is expected to increase by 0.4% in the EU and decrease by 0.6% in China. However, the expected increase in economic activity will be marginal in most EU Member States.

These effects are based on a long-term model, but the results are likely to be larger in the short term. Looking at the supply chains of affected manufacturers in China, the data show that they rely very heavily on Chinese tier-one suppliers for 91% of all components. US companies operating in China account for the largest remaining share (3.3 percentage points). EU-based tier-one suppliers in China are mainly subsidiaries of German carmakers, accounting for 1.3 percentage points.

Read a detailed analysis of the report here and (in German) here.