China considers steep tariffs, trade tensions escalate

China is considering introducing a 25-percent tariff on cars from the European Union and the United States. For now, only cars with larger engines are affected. However, some manufacturers will suffer greatly if these announcements come to fruition.

Chinese automotive brands are becoming increasingly bold in foreign markets. It took only a few months for them to make a noticeable presence in Europe and the USA. This rapid expansion has alarmed authorities, prompting them to closely examine its foundations. It was revealed that Chinese cars might be subsidized by the local government, violating competitive principles.

The United States reacted firmly by introducing a 100-percent tariff on Chinese electric cars. The European Union has similar, though not as radical, plans, announcing an increase in the existing tariff from 10 to even 30 percent.

The reasons for these actions are suspicions regarding the subsidization of Chinese brands by their government and a lack of transparency in the activities of Chinese players in Europe. The European Commission emphasizes that companies like BYD, SAIC, and Geely do not cooperate with European authorities regarding transparency related to subsidies or supply chains.

Unfortunately, there is no indication that this will change. The Chinese have not presented evidence that could refute the EU and USA's allegations. Instead, they have threatened 25 percent counter-tariffs on cars imported from Europe and the United States.

The Chinese Chamber of Commerce at the EU published a statement on X, indicating it had been informed of the Chinese plans by "individuals with access to confidential information."

They referred to an interview published on Tuesday, May 21, by the ruling Communist Party's newspaper "Global Times," in which Liu Bin, the chief expert of the Chinese Center for Automotive Technology and Research, called for raising the tariff rate on imported cars with an engine capacity above 2.5 liters.

Last year, China imported 250,000 cars in this category, imposing a 15-percent tariff. However, the World Trade Organization rules allow for an increase in the tariff to 25 percent.

If this actually happens, the most affected will be European premium brands such as BMW and Mercedes, which sell many models with larger engines in China. The final decisions—at least officially—have not yet been made. However, this does not change the fact that the situation is becoming increasingly tense and the specter of a trade war is becoming more apparent.