After an eight-month investigation, the European Union has announced that it will impose tariffs as high as 38.1% on electric vehicles from China to offset the unfair advantages created by Chinese government subsidies. In retaliation, China immediately launched an anti-dumping probe into pork imports from the EU. The two sides agreed to negotiate a solution to the trade dispute.
China’s EV industry arose from a government program launched in 2011 to push the country’s automakers in a new direction. Technologically advanced EVs were chosen as the focus for two reasons: To reduce China’s dependence on imported oil, which accounts for more than 70% of total supply and has become a significant national security concern, and to catch up with the major car-producing countries, which would have been impossible had China continued to produce internal combustion models. EVs were in their infancy and no automaker, save for Tesla, had a clear advantage at the time.
To generate domestic demand for EVs, the Chinese central government and many local governments provided purchase subsidies, which are more transparent and distort price signals less than the subsidies it offered for investments in solar panel manufacturing. The government began to phase out these purchase subsidies in 2018 and eliminated them altogether by the end of 2022.