EU's protectionist tariffs will backfire

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Despite talks, the European Union insists on imposing duties, which would stay in force for five years, on imports of electric vehicles (EVs) from China starting Wednesday. "By adopting these proportionate and targeted measures after a rigorous investigation, we're standing up for fair market practices and for the European industrial base," said European Commission Executive Vice-President Valdis Dombrovskis.

China's Ministry of Commerce responded that China does not agree with or accept the European Union's decision to impose additional tariffs on electric vehicles manufactured in its market, pledging the country will take all necessary measures to safeguard the interests of its companies.

Talking about "fair market practices," the EU's tariffs on Chinese EVs reveal the bloc's deep-seated protectionist impulse that will eventually cripple its own competitiveness.

True, China's EV industry has been charging ahead in recent years, with its market share rapidly expanding across the globe, especially in Europe. But the popularity of Chinese EVs is a combined result of robust supply chains, innovation and full market competition, not "unfair subsidies" as some Westerners exaggerate.

China is the only country in the world that possesses all the industrial categories in the United Nations industrial classification, holding the top spot in manufacturing scale for over a decade.

Take Changzhou in Jiangsu Province for example. According to the local government, Changzhou hosts 31 of the 32 key segments in the power battery supply chain. That is nearly 97 percent of all segments in the entire supply chain. Supply chain integration and clustering bring down costs for China's EV industry.

Additionally, years of heavy R&D investment have put China at the forefront in areas like batteries, motors, electronic controls, and smart technologies, giving Chinese EVs a solid technological foundation. As the world's largest EV battery manufacturer, Chinese brand CATL's latest batteries can charge for 10 minutes to provide a range of 600 kilometers and can be fully charged in 30 minutes for a 1000-kilometer range.

People view a new energy vehicle on display at the 26th China Beijing International High-tech Expo in Beijing, capital of China, July 13, 2024. [Photo/Xinhua]

Market competition has further boosted the competitiveness of Chinese automakers. With Volkswagen setting up its largest R&D center outside of Germany in China, and both Mercedes-Benz and BMW launching joint ventures in Beijing, Chinese automakers are under heavy competitive pressure to accelerate their innovation.

While slapping tariffs on Chinese EVs, Brussels has not provided solid evidence of their "unfair subsidies" or "actual damage" to European counterparts. Apparently, the EU's latest decision is more politically driven than economically justified. Under the guise of "fair market practices," the EU is setting up protectionist barriers for rivals in an attempt to buy time for its local auto industry to enhance its competitiveness.

True, such an endeavor may be good news for the European auto industry in the short term, but it will eventually cripple the EU's growth in the long run. A lack of cut-throat competition will only dampen, not improve, innovation in EU carmakers and slow down, not accelerate, their transition to EVs.

The imposition of tariffs is "a setback for free global trade and for prosperity, the preservation of jobs and Europe's growth," said Hildegard Müller, the head of German Association of the Automotive Industry (VDA). Earlier, Hungarian Foreign Minister Péter Szijjártó also warned that the tariffs would stifle the future competitiveness of the European economy.

In addition, the EU's decision threatens to undermine its decades-long cooperation with China, which is vital to European growth. In terms of EV cooperation, the VDA stated on July 3 that advancing EV mobility in Europe means relying on raw materials and (battery) technologies from third countries, particularly China; hence, maintaining an open market and constructive trade relations (with China) would be crucial.

While China is open to dialogues and cooperation, the EU's decision on anti-China tariffs will inevitably hurt Beijing-Brussels ties. China has already filed WTO complaints against the EU over the tariffs and a further deterioration of China-EU relations will only lead to multi-lose scenario.

In the face of competition, cooperation is the only way out. Instead of setting up protectionist barriers, rolling out the red carpet for rivals is the solution.