China considers higher tariffs on large petrol cars as EU tensions escalate

“The timing of the action basically suggests that this is a response to the EU tariff on made-in-China EVs,” said Gary Ng, senior economist at Natixis Corporate and Investment Bank.

“China might hope for a product that probably is less painful for itself and probably affects some of the EU countries a bit more than the others. So this is more like targeting the advantage of the others.”

In an article posted by state broadcaster CCTV in June, Chinese producers had called for import tariffs on European cars during a closed-door meeting attended by Chinese trade officials in Brussels earlier that month.

And in a separate CCTV article in June, Cui Fan, a professor at the University of International Business and Economics, had suggested raising import tariff on European cars to 25 per cent, which he said would be in line with World Trade Organization (WTO) rules.

02:03

Chinese-made electric vehicles face additional EU import tariffs of up to 38%

Chinese-made electric vehicles face additional EU import tariffs of up to 38%

Large engine petrol-powered vehicles usually include sports utility vehicles, limousines and other luxury segments, in which European manufacturers have long been competitive.

China’s vehicle imports fell by 10 per cent last year from a year earlier to 800,000, which included 196,000 petrol-powered passenger cars with engines larger than 2.5 litres from the EU, according to the China Automobile Dealers Association.

The import value of large engine petrol-powered vehicles from the EU rose by 3 per cent year on year to US$17.9 billion last year, higher than the value of EVs exported from China to Europe.

02:21

China’s EV drive in Cuba reshapes Havana’s roads

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Europe has been the primary destination for Chinese-made EVs, with about 38 per cent of China’s 1.2 million EV exports heading to Europe last year.

Cui Hongjian, a professor with the Academy of Regional and Global Governance at Beijing Foreign Studies University, said earlier this week that the latest proposal by the EU was “obviously not in line with China’s expectations”.

“Regrettably, the use of trade defence instruments by one government is increasingly being responded to seemingly in kind by the recipient government,” the European Union Chamber of Commerce in China said on Wednesday in response to China’s investigation into fresh and processed cheese, as well as uncondensed milk and cream without added sugar or other sweeteners.

In the first half of the year, China’s EV exports to the EU declined by 15 per cent year on year, according to Chinese customs data.

Monthly exports in June marked a new low for the year, dropping below the 30,000-unit mark for the first time, representing a 31 per cent decrease.