Turkiye Faces Customs Tariff: Chinese Electric Vehicle Prices May Rise

German Economic Institute Warns Possible EU Decision Could Impact Turkiye’s Automotive Market

The Kiel Institute for the World Economy (IfW) warns that potential customs duties imposed by the European Union (EU) on Chinese electric vehicles could disrupt the trade of electric cars. According to the analysis shared by the German Kiel Institute for the World Economy (IfW) regarding the possible anti-dumping duties that the European Union (EU) may apply to Chinese electric cars, the tariff increase will lead to a 25% decrease in vehicles imported from China, with the increased decline being balanced by production within the EU, resulting in higher prices for end consumers.

The analysis points out that “if the EU imposes a 20% tax on electric cars imported from China, this will have a noticeable impact on bilateral trade and production within Europe.” It highlights that there will be a 25% decrease in electric cars imported from China.

With the EU importing 500,000 electric vehicles from China in 2023, the analysis indicates that the estimated $4 billion decrease will equate to approximately 125,000 vehicles.

Furthermore, the analysis emphasizes that “this decline will be largely offset by increased production within the EU and a shift from exports to domestic sales for approximately $1 billion worth of electric vehicles.” It suggests that if China exports fewer electric vehicles, demand for inputs for production within the EU will also decrease.

Moritz Schularick, President of IfW, argues that given China’s subsidy practices, the EU Commission has the right to apply punitive customs duties in response. He emphasizes the importance of not weakening the Commission’s authority by member states for private interests, stating, “A divided EU is a weak EU.”

Julian Hinz, a trade researcher at IfW, suggests that the possible anti-dumping duties on Chinese electric vehicles by the EU Commission will likely lead to higher prices for electric cars for consumers. He comments, “Production within the EU is much more expensive than in China due to higher energy and material prices and significantly higher wage costs. It is by no means certain that European car manufacturers will fill this gap, and Chinese manufacturers like BYD could also meet local demand with new facilities in Europe.”

The result of the investigation will be announced on June 10th

In October 2023, the EU launched an investigation into electric vehicles imported from China, alleging that they “distorted the market.” The announcement of the investigation, initially planned for June 5th, is expected to be delayed until June 10th to keep the contentious issue out of the election campaign.

The decision to be announced will include whether the EU Commission will apply anti-dumping duties to Chinese electric vehicles.

While China is seen as a negotiating partner for the Union, it is also viewed as an economic and systemic rival.

With export-driven economies, the Union has long been one of the biggest beneficiaries of China’s opening to the global economy. However, concerns have recently arisen in Europe due to China’s delivery of the latest technologies in automobiles and Beijing’s cheaper production on the continent.

Chinese electric vehicle manufacturers enjoy a 30% cost advantage. On the other hand, most electric vehicles imported from China are produced in Western manufacturers’ factories in the country. Therefore, the German government opposes possible EU tariffs on Chinese-made electric vehicles.

If the EU imposes anti-dumping duties on these products from China, Beijing is expected to respond with countermeasures.

Meanwhile, in response to “unfair” trade practices, the US administration has decided to increase customs duties on approximately $18 billion worth of imports from China, including steel and aluminum, semiconductors, electric vehicles, and batteries, starting from August 2024.

Source: Bloomberght / Prepared by Irem Yildiz

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