Beijing, Brussels may meet halfway on EV tariffs

The prospect of China and the European Union nearing an alternative solution on the EU's imposition of extra tariffs on Chinese-made electric vehicles will provide a much-needed buffer to avoid the escalation of trade tensions between the two economic powerhouses, analysts said.

China and the EU meeting each other halfway on the tariff issue would not only benefit the EV industry on both sides, but also contribute to the broader bilateral economic relationship, they added.

Bernd Lange, chair of the Committee on International Trade of the European Parliament, told German broadcaster n-tv on Friday that Brussels and Beijing are close to reaching a deal that would see China commit to offering EVs in the EU at a minimum price, although he did not provide any further details on the specifics of the arrangement.

Amid simmering tensions for months over unfounded allegations of the so-called unfair subsidies in China's EV industry, the EU completed its probe on Oct 29, placing additional tariffs of up to 35.3 percent on Chinese EV imports for five years, on top of the standard 10 percent import duty.

Despite the tariff imposition, Chinese and EU technical teams engaged in five rounds of discussions in Beijing from Nov 2 to 7, as well as video talks in the following week, aiming to reach a potential price undertaking agreement.

Under this arrangement, China would agree to a mutually acceptable export price and volume for its EVs in exchange for the EU removing the tariff hikes.

A source familiar with the matter told China Daily earlier this month that China and the EU reached a "technical consensus" after the talks, particularly on the framework for the price undertaking agreement and its implementation mechanism.

Building on the progress, both parties expressed willingness to focus on negotiating issues related to their core interests and reach a mutually beneficial agreement, the source said.

Neither the European Commission, the EU's executive arm, nor China's Ministry of Commerce had commented on Lange's remarks as of press time on Monday.

The deal, if finalized, could satisfy the EU's demands for shielding its local automotive sector, while preventing the levying of steep tariffs on Chinese EV imports, said Sang Baichuan, dean of the University of International Business and Economics' Institute of International Economy.

The price undertaking agreement could provide temporary relief for European carmakers, but Sang noted that building a local value chain that could truly support the sustainable growth of the EU's electric vehicle industry is a long-term endeavor.

Simply suppressing supply from China is not the way out, said Sang, who added that European companies should evaluate their competition and collaboration with Chinese companies in a more calm and rational manner.

According to a report published in April by the International Energy Agency, China currently dominates the battery supply chain, with nearly 85 percent of global battery cell production capacity.

"The price undertaking will ultimately revert to market-based pricing in the long run," Sang said, adding that this is expected to prompt Chinese automakers to reevaluate their product positioning, cost structures and various aspects of their value chains.

Cui Hongjian, director of Beijing Foreign Studies University's Center for European Union and Regional Development Studies, said the EU official's statement indicates a push within the group for arriving at a consensus with China at an early date.

Given the economic challenges confronting Europe and the opposition from multiple member states, it is strategically prudent for the EU to steer clear of escalating trade tensions, which could potentially inflict more severe repercussions on its economy, Cui added.

The Chinese government, in line with regulations, is imposing temporary anti-dumping measures on selected EU brandy imports, as announced by the Ministry of Commerce in early October. This action coincides with the ongoing investigations into EU imports of pork, pork byproducts and dairy products.

Furthermore, Chinese officials are considering heightened tariffs on imported fuel-powered vehicles with large-displacement engines from the EU, according to the ministry.