Berlin is making a last-ditch effort to block or dilute the European Union's planned tariffs on Chinese electric vehicles (EVs), which are expected to take effect on 4 July. The EU's executive arm has proposed duties of up to 38.1% on Chinese EV makers, following an investigation that concluded Beijing had heavily subsidised its manufacturers, allowing them to undercut European rivals on price.
Chancellor Olaf Scholz has been vocal in his opposition, warning that such measures could have far-reaching consequences for jobs and prosperity. "Isolation and illegal customs barriers – that ultimately just makes everything more expensive, and everyone poorer," he said in a statement reported by the Associated Press. "We do not close our markets to foreign companies, because we do not want that for our companies either."
Germany's stance is rooted in the deep entanglement of its automotive industry with China. BMW, Volkswagen, and Mercedes-Benz all operate massive production plants in China and benefit from local subsidies, cheaper land, and relaxed regulations. If Beijing retaliates with tariffs on European-made vehicles with large engines – as it has hinted – these advantages could evaporate, and sales in China, which account for a significant share of German automakers' revenue, could suffer.
The stakes are high. China is the world's largest auto market, and German brands have long relied on it for growth. A trade war would not only hurt their bottom line but also disrupt the delicate supply chains that underpin the European auto sector. As German exports already face headwinds, a further shock would be unwelcome.
Tariffs: a blunt instrument?
Analysts are divided on whether the EU's tariffs are the right tool. Jochen Stanzl, chief market analyst at CMC Markets, argues that the proposed duties are too low to shield European manufacturers from Chinese competition. "At up to 38%, these tariffs are much lower than the 100% imposed by the US government," he notes. "They are not high enough to shield Volkswagen, BMW and Mercedes from low-cost competition from the Far East as they transition from internal combustion engines to electric vehicles."
Stanzl adds that the tariffs could backfire, triggering Chinese retaliation and creating a "damaging feedback-loop" that hurts German automakers more than it helps. Indeed, while European auto stocks dragged the DAX down on the day the tariffs were announced, shares of Chinese EV makers rallied.
Russ Mould, investment director at AJ Bell, suggests the EU might be better off focusing on boosting demand for EVs rather than opening another trade front. "Consumers seem wary of the cost of EVs, range capabilities, the availability of charging infrastructure and also the issue of what to do with the battery once an EV is no longer needed," he says. "Addressing all of these issues proactively could perhaps be a better course of action than opening up another trade war."
Mould points to Umicore's recent profit warning as a sign that EV demand is flattening, making the timing of tariffs particularly questionable.
Climate goals at risk
There is also a broader environmental dimension. European consumers have been turning to Chinese EVs because they are affordable and come with perks like free charging for two years and dash cameras. With the cost-of-living crisis squeezing household budgets, many Europeans cannot afford pricier European models. Chinese EVs, some argue, are essential to keeping the continent on track for its net-zero targets.
Thom Groot, CEO of The Electric Car Scheme, welcomes Germany's pushback. "The last minute attempt by Germany to halt, or soften new tariffs for EVs from China should be welcomed by consumers," he says. Citing International Energy Agency data, he notes that 57% of all new battery electric vehicle registrations come from China. "If we are serious about hitting our 100% goal by 2035 and overall net zero ambitions, we should be embracing this technology input, not shying away from it."
Groot also warns that tariffs punish the least well-off consumers most. His research shows that for 68% of people, cost is the biggest barrier to getting an electric car.
Germany's opposition to the tariffs is therefore not merely protectionism for its own industry; it reflects a broader concern about the EU's competitiveness and its ability to meet climate goals. As the bloc navigates its relationship with China, the outcome of this dispute will have lasting implications for both its economy and its environmental ambitions.
