China takes EU to WTO over ‘unreasonable’ tariffs on electric cars

China has filed a lawsuit against the European Union before the World Trade Organization (WTO) over the steep tariffs the bloc has slapped on its electric vehicles (EVs), which Brussels argues benefit from excessive subsidies to retail at artificially low prices in global markets.

The duties, ranging from 7.8% to 35.3% depending on the brand, come on top of the an existing 10% levy and are being collected as of Wednesday, 30 October.

The trade measures, designed by the European Commission to offset Beijing’s financial aid and prevent EU firms from being pushed out of the increasingly lucrative EV sector, will remain in place for five years.

“China has repeatedly pointed out that there are many unreasonable and non-compliant aspects in the EU’s anti-subsidy investigation on Chinese electric vehicles. It is a protectionist practice of ‘unfair competition’ in the name of ‘fair competition,’” the Chinese Ministry of Commerce said in a statement published overnight.

“China does not agree with or accept the ruling and has filed a lawsuit under the WTO dispute settlement mechanism. China will continue to take all necessary measures to resolutely safeguard the legitimate rights and interests of Chinese companies.”

The ministry, though, did not announce any fresh tit-for-tat steps. China has previously threatened retaliation against the EU’s dairy, brandy and pork industries, moves that Brussels has decried as “unwarranted”.

Instead, the ministry stressed its willingness to continue negotiations with the Commission to achieve a solution “as soon as possible” that could reverse the tariffs, an avenue heavily favoured by Germany.

The talks focus on the possibility of establishing minimum prices for Chinese EVs.

While EU officials are open to exploring a deal, they warn minimum prices for a product as sophisticated and diverse as EVs could prove impossible to enforce by customs officials. The Commission has already struck down a previous offer.

The Chinese Chamber of Commerce to the EU, which is involved in the process, denounced the tariffs as “arbitrary”, “unjustified” and “politically motivated”, and warned they could have a “complex impact” on the ongoing discussions about minimum prices.

“We are also disheartened by the lack of substantive progress in negotiations before the decision deadline,” the chamber said.

The Commission has not yet received the WTO lawsuit, a spokesperson said, and the filing is yet to appear on the WTO website.

The executive has consistently defended its investigation as fact-based, diligent and compatible with WTO rules. Its findings, released in June, served as the legal justification for the import tariffs.

Thanks to Beijing’s financial aid, the Commission said, Chinese EV producers have increased their sales in Europe at an extraordinary pace: their market share jumped from 1.9% in 2020 to 14.1% in the second quarter of 2024, according to internal estimates.

“There’s a clear and imminent threat to our car industry not making the transition to electric vehicles and being therefore wiped out,” a senior EU official said on Tuesday, warnings about the closure of plants and the dismissal of thousands of workers.