China threatens EU and US with retaliatory vehicle tariffs up to 25%

China has threatened to impose retaliatory tariffs of up to 25% on vehicle imports from the EU and US. This comes after the US increased tariffs on Chinese goods, including EVs, to 100%. The EU is also considering tariffs following a probe into Chinese automakers, who are seen as being unfairly subsidized. China's potential tariffs could significantly impact US and EU automakers and escalate already high international trade tensions.

The main reasons behind the trade tensions between China, the EU, and the US, particularly in relation to electric vehicles (EVs), are primarily rooted in concerns over unfair trade practices, subsidies, and the rapid growth of China's EV industry.

1. Unfair trade practices: The US and EU have accused China of providing unfair subsidies to its domestic EV manufacturers, giving them an advantage in the global market. The European Commission determined that Chinese automakers have been "unfairly" subsidized as exports into the region.

2. Market disruption: Chinese EV manufacturers, such as NIO, XPeng, BYD, and ZEEKR, have begun expanding into new regions, including Europe. Their advanced technology and competitive pricing have disrupted the local automotive industries, prompting probes and threats of tariffs from both the US and EU.

3. Protectionism: The rise of protectionist policies has fueled trade tensions among the three global superpowers. The US has already taken action with tariffs on goods originating from China, while the EU is considering similar measures. China, in response, has threatened to impose tariffs on vehicle imports from both the US and EU.

4. Climate change and the Inflation Reduction Act: China's Ministry of Commerce filed a complaint with the World Trade Organization, targeting the US' Inflation Reduction Act, which it deems unfair. The policy is aimed at accelerating the adoption of EVs to combat climate change, but it has caused trade tensions to escalate between the US and China.

5. Economic rivalry: Underlying the trade tensions is an economic rivalry among the three powers. China's rapid growth as a global player has disrupted the traditional dominance of the US and EU, leading to increased competition and conflicts over trade policies5.

These trade tensions have the potential to slow down the growth of the global EV market and hinder international cooperation on climate change initiatives.