France and Germany Clash Over Taxation of Chinese Cars

European countries approved today the additional customs duties applied to electric cars manufactured in China.

The outcome of the vote was not really in doubt as a majority was needed to reject the proposal for additional customs duties on cars imported from China. Sanctions that have already been in place for several months. However, the vote highlighted strong divisions within the Union. The stakes are high as the customs duties imposed on electric vehicles manufactured in China can exceed 45% and will cost Chinese car manufacturers billions of dollars just to bring their cars into the European market. These sanctions will be implemented definitively at the end of the month for a duration of five years.

The Commission, which oversees the EU’s trade policy, opposes what it considers unfair Chinese subsidies following a year-long anti-subsidy investigation, but it has also stated that discussions with Beijing will continue. It remains to be seen whether Beijing still wants to engage in discussions with Europe…

Germany to the rescue of its manufacturers

During the crucial vote this Friday, 10 EU members supported the customs duties and five voted against. 12 abstained. A vote in form only since an absolute majority of 15 EU members, representing 65% of the EU population, would have been needed to block the proposal, and with France and Italy in favor, the outcome was clear.

Germany, on the other hand, has consistently expressed its opposition to these sanctions, fearing a severe backlash from China. This position is quite logical since major national manufacturers Audi, BMW, and Mercedes have substantial operations in China and can now fear retaliatory taxes. In contrast, France, which exports little or no cars to China, is more inclined to protect its manufacturers. But one should not underestimate the Chinese; the means of retaliation are already known. Wine, spirits, luxury products, and also dairy products are in their sights. The showdown has only just begun.

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