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Trade and technology

EU tariffs on Chinese EVs: A climate conundrum

Published 09 July 2024

The EU imposed additional tariffs of up to 38% on Chinese electric vehicle imports last month, after the US placed 100% in similar levies. But Europe’s decision comes at a cost to its net zero goals.

With many ambitious climate targets to meet, the European Union’s tariffs on Chinese electric vehicles (EVs) could backfire on its environmental goals at a time when the adoption of EVs is just gaining momentum.

The move would negatively impact uptake of EVs through price increase for consumers, undermining trade and environmental cooperation between the EU and China, and stifle innovation in the European automotive sector.

The European Commission on 4 July announced that it will apply provisional tariffs ranging from 17.4% to 37.6% on EVs made in China (a slight downward revision for the highest tier tariff of 38.1% announced last month), alleging that Chinese "unfair subsidization" has imposed economic injury to domestic EV producers. These provisional tariffs in addition to the existing 10% duty on all imported cars are applied while the EU and China continue their talks on the tariffs with a final decision to be made by the EU through a vote in November. The EU's move comes after the US decided to impose a 100% tariff on Chinese EVs from August 1, 2024, citing national security concerns. Both the US and the EU accuse China of distorting competition and harming their domestic industries that make EVs, EV batteries, and related components.

However, Chinese-made EVs already enjoy a large production cost advantage over European counterparts, and the leeway to lower the eventual tariffs render the EU’s levies potentially useless. A bigger casualty of the tariffs on green goods like EVs is the European Green Deal to achieve climate neutrality by 2050 and reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990. The transport sector is a major source of emissions in the EU, accounting for about a quarter of the total emissions. Within the sector, road transport constitutes the highest proportion of overall transport emissions and therefore requires urgent decarbonization. The EU has set targets to reduce carbon dioxide emissions for new cars by 55% from 2030 to 2034, compared to 2021 levels, and to eliminate them completely from 2035.1 It also plans to increase its share of renewable energy sources in transport to 14% by 2030.2

Relying on tariffs to deter foreign competition and protect its domestic green mobility sector will not help the EU meet its climate objectives. It will instead have the following impact:

  1. Price increases

Increased tariffs would make imported EVs more expensive as European distributors can pass on the increased costs to consumers, who end up bearing the brunt of the price increases. This reduces the demand for EVs among European consumers and discourages them from switching away from fossil fuel vehicles. EVs are already more expensive than fossil fuel vehicles at the higher end.

Table 1 – Comparison in prices between selected EV and fossil fuel-powered car models available in Europe

Figure 1 - Price gap between the sales-weighted average price of conventional and electric vehicles in selected countries, before subsidy

Figure 2 – Share of battery and plug-in hybrid passenger cars as a percentage of total EU fleet

Price increases for EVs after the imposition of tariffs can deter consumers from switching away from internal combustion engines (ICE) vehicles. In contrast to ICE vehicles, EVs face low adoption rates in most European markets where price increases for more affordable models can have a significant impact.

The overall fleet of passenger battery electric vehicles (BEVs) across EU member states is only at 1.68% and plug-in hybrid electric vehicles (PHEV) at 1.32% of total passenger cars in 2023 (Figure 2).3 This suggests that there is a large untapped pool of potential demand in European EV market.

Norway, which sets a national goal of having its entire car fleet be zero-emission by 2025, has the highest uptake of electric cars globally at 689,169 out of 2,886,795 (23.9%) registered private cars in 2023. This is a result of a wide range of incentives introduced as early as 1990 to encourage EV purchases and legislation introduced to permit establishment of charging infrastructure at apartment buildings and major roads. Compared to Norway, many EU member states are lagging in EV adoption. Many EU member states will need more time to invest in EV-supportive infrastructure and develop legal frameworks based on domestic conditions.

  1. Undermine cooperation on climate goals

By targeting EVs made in China, the tariffs could escalate trade tensions and undermine cooperation between the EU and China, which are both major players in the global effort to combat climate change. The tariffs could prompt China as a major trading partner of the EU and the biggest producer and consumer of EVs to retaliate by imposing tariffs on European exports such as alcohol and agriculture products or limiting access of European firms to its large and growing EV market. The EU is also probing China’s state support for wind turbine companies, which could also widen to other sectors and further snarl global supply chains and cooperation on green technologies. A possible tariff war between the EU and China stands to harm businesses and consumers on both sides.

Increased trade friction would undermine cooperation and dialogue between the two sides on environmental issues, such as the implementation of the United Nations Framework Convention on Climate Change, the Paris Agreement, and the Kunming-Montreal Global Biodiversity Framework, disrupting the development of green technologies and the promotion of sustainable development. International collaboration to advance climate change is a global effort and requires the involvement of China, which is the world’s largest emitter of CO2 but also the world’s leader in renewable energy production. Investments in the EU’s EV infrastructure, as well as renewable energy such as solar and wind, could benefit from sectoral partnerships in the renewable energy sector to increase Europe’s demand for energy used in EV charging. Therefore, the EU should carefully weigh the costs and benefits of its trade policy and seek a constructive dialogue with China to resolve the issues in a mutually beneficial way.

  1. Stifle innovation and competition

Relying on protectionist measures such as imposing tariffs tends to stifle innovation and competitiveness. The EU boasts many automotive manufacturers that have invested significantly in research and development (R&D) for decades, resulting in improved fuel efficiency, reduced emissions, and improvements in the safety of ICE vehicles. These achievements have given European cars a brand value that commands premium prices.4 To preserve such brand value in an era increasingly defined by technology, automation, and artificial intelligence, European incumbent original equipment manufacturers (OEMs) in the automotive sector will need to understand customers’ changing needs and preferences and acquire new technologies to build products that the market wants. Imposition of tariffs to shield European incumbent OEMs from Chinese competition has the potential to disincentivize product innovation that are competitively priced in the European market.

Moreover, the tariffs on imported EVs from China will also harm the profitability and competitiveness of European automakers, many of which have forged valuable partnerships with Chinese automakers and technology firms to develop more innovative EV models and gain access to the Chinese market. For example, Volkswagen has a joint venture with SAIC to produce EVs in Chinese factories and another partnership with XPeng Motors for joint development of two smart e-cars. Audi and SAIC have a partnership to develop intelligent connected vehicles based on China-specific platforms. Renault has a joint venture with Jiangling Motors Corporation Group (JMCG) and BMW has a joint venture with Brilliance Automotive Group and Great Wall Motors. With significant cooperation in R&D taking place between European and Chinese automakers, European automakers that are producing in China to tap the Chinese market and its supply chains, while exporting a portion of their output back to Europe, will suffer from the EU’s tariff measures.

Addressing national-level concerns is key to EU green mobility

Imposition of tariffs on Chinese-made EVs will have implications on EU member states’ national-level targets for green mobility. Instead, one key approach to advance the EU’s green mobility ambitions is to address a range of domestic concerns among member states that have kept EV adoption rates low for a large number of European countries. Many European countries still lack the necessary infrastructure, financial support, and regulatory frameworks to encourage the uptake of EVs among consumers. This makes them more dependent on imports of cheaper EVs. Increasing tariffs on more affordable EVs simply deters the uptake of EVs.

Figure 3 – Newly registered electric vehicles and plug-in hybrid electric vehicles in EU and non-EU European Economic Area (EEA) countries (2022)

Many EU member states, particularly in Central and Eastern Europe, have low adoption rates of BEV and plug-in hybrids. Figure 3 illustrates that BEVs and hybrid vehicles in more than half of the EU’s member states each accounted for less than 10% of total passenger fleets in 2022, with Slovakia, Czechia, Poland, Cyprus, and Estonia at the bottom.

While the European Council and Parliament set bloc-wide policies and strategies, each member state has its own policy framework to support the EV industry and adoption. This leads to a fragmented and inconsistent landscape of incentives, regulations, and infrastructure across the EU, which affects the level of EV adoption in different countries5. For example:6


  • EV subsidies program in countries such as Germany, France, Italy, Austria, and Hungary
  • Tax exemption and/or reduction for EV ownership in countries such as Austria, Bulgaria, Germany, Italy, Portugal, Romania, Slovakia, and Sweden
  • Charging infrastructure support provided in countries such as Italy, Spain, and Sweden
  • Excise duties on fossil fuels in countries such as Italy, France, Finland, and Sweden


  • Fossil fuel subsidies in countries such as Portugal, Greece, Cyprus, and Hungary7
  • Limited EV charging infrastructure in countries such as Romania, Poland, Malta, Bulgaria, and Croatia8

To facilitate the transition to low-carbon mobility, the EU should consider the diverse needs and situations of its members and provide them with tailored assistance and guidance. The EU should foster cross-border cooperation and coordination on EV policies and standards, and invest in research and innovation to enhance its own EV industry's competitiveness and quality. This would help the EU achieve its climate goals and maintain a fair and balanced trade relationship with China and the rest of the world. The EU should also take into account the substantial manufacturing employment generated by the automotive sector, both directly and indirectly, and develop policies to support labor transition for workers affected by the trend toward vehicle electrification.9

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Jia Hui Tee

Jia Hui Tee is Senior Trade Policy Analyst in the Trade Policy program at the Hinrich Foundation specializing in research on international trade, digital trade and development economics.

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