China responds to EU's proposed EV tariff rates with retaliatory dairy probe

China has responded to the European Commission's (EC) draft of tariffs on its electric vehicles (EV) industry with a probe into European dairy producers.

Yesterday (21 August) it announced investigations into 20 subsidy programmes across eight EU countries that support the production of milk, cream and cheese.

This follows the EC's publication its draft decision on proposed EV duties on Tuesday, following a lengthy investigation into the Chinese automotive industry.

Dairy probe

The Guardian reports that China's Chamber of Commerce to the EU said that it had received a complaint from two dairy trade bodies on 29 July and that a consultation has taken place with the EU on 14 August.

A range of different schemes, ranging from loans and livestock insurance, to subsidy schemes for equipment, livestock and producers will be investigated in:

• Ireland
• Austria
• Belgium
• Italy
• Croatia
• Finland
• Romania
• Czech Republic

The European Chamber of Commerce in China said that it regretted the recent trend in "trade defence instruments by one government increasingly being responded to seemingly in kind by the recipient government" and hoped that China's investigation would be "conducted fairly and transparently".

EV rate details

The EC's draft EV tariffs – which European authorities stress are subject to change – are below the provisional figures imposed in July. The EC says it has informed all interested parties, including the Chinese government, and will announce the final tariffs later in the year.

The rates to be imposed on individual manufacturers are as follows:

·         BYD: 17.0%

·         Geely: 19.3%

·         SAIC: 36.3%

·         Other cooperating companies: 21.3%

·         All other non-cooperating companies: 36.3%

These measures won’t be applied retroactively as the legal requirements for retroactive enforcement were “not fulfilled”.

The EC said that any decision to raise or lower tariffs resulted from “technical corrections based on substantiated comments”.

“These revisions show that the Commission fully respects all relevant rules and obligations, and bases its findings strictly on facts and evidence.

“It similarly proves that the greatest care is taken to ensure that the investigation is both robust and correct.”

The China Association of Automobile Manufacturers told China’s state media channel, CCTV, that the decision nonetheless brought "enormous risks and uncertainty" for the country’s operations in the EU.

Tesla rates

The EC decided to apply a lower rate of 9% to Tesla vehicles, down from an initial 20.8%, explaining that:

“As announced at the provisional measures stage, Tesla submitted a substantiated request for an ‘individual examination’ to determine its duty level based on the specific subsidies it received.”

Tesla has not publicly commented on the decision. However, it follows a very public spat between Tesla CEO, Elon Musk, and European commissioner, Thierry Breton, raising concerns over “harmful content” published on Musk’s social media platform, X (formerly known as Twitter).

Next steps

The investigation came after EC president Ursula von der Leyen identified the risk of low-cost exports from China harming EU producers in her State of the Union address.

Interested parties now have ten days to submit information to European authorities. After this, the EC will make recommendations to member states, which will vote over whether or not to approve them and make the tariffs definitive.

According to a Q&A from the EC, the final regulation will be published by 30 October 2024 at the latest.