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The EU announced on August 20 that it would be lowering its proposed tariffs on Tesla electric vehicles (EVs) manufactured in China. The notice, the latest in a series of seismic shifts in European EV policy, was emblematic of the challenging position in which the bloc now finds itself. In an effort to shield its own burgeoning EV industry from unfair competition, Brussels has spent much of 2024 wrestling with the realities of imposing higher tariffs on Chinese EVs, which have flooded the European market in recent years.

The tussle has followed closely on the heels of similar developments unfolding across the Atlantic. In May, the United States announced its own levies on EVs made in China, the most recent salvo in the long-running trade standoff between the two countries. Given their similar timing and content, the two tariff increases are seen by many as linked. Such comparisons are problematic, but transatlantic discussions on EV tariffs could provide a valuable opportunity for greater coordination, particularly as it relates to China.

Similar Tools, Different Implementation

Like many other industries that China prioritizes, the booming EV sector benefits from massive government subsidies. Competitors, unsurprisingly, criticize the practice as unfair and potentially destabilizing. Washington and Brussels responded by imposing their significant tariffs, albeit with key differences

The U.S. tariffs may appear at first glance to be far more substantial than those proposed by the EU. Washington, after all, has imposed a whopping 100% duty on Chinese EVs, due to come into effect this Fall. This, however, will have only a minor impact on overall U.S. trade since the country imports a mere 2% of EVs from China. Some experts argue that the measure was driven more by a desire to signal discontent with Beijing than by any meaningful effort at economic retribution.

The EU’s proposed tariffs are more measured and deliberate. Beginning in fall 2023, Brussels conducted an in-depth investigation into China’s EV subsidies, which culminated in June with the announcement of additional tariffs ranging from 17% to 38% on imports of those vehicles. The rates vary based on the degree to which firms cooperated with the investigation. The move, an attempt to “level the playing field”, was evidently not made lightly. Nor was it final. In the months that followed, EU officials have adjusted the rates, including by reducing the levy on Teslas from 20.8% to 9%. In a further departure from the U.S., the EU has also announced that it is open to tariff negotiations with Beijing. This more restrained approach to EV tariffs makes sense for Europe, which currently imports a substantial 37% of its EVs from China. With the continent already in the throes of a cost-of-living crisis, officials in Brussels are disinclined to place additional burdens on European consumers. This, coupled with the deep ties between many European car manufacturers and China, has resulted in a more cautious tack.

Seizing the Moment

Regardless of their differences, the American and European tariffs present an opportunity for greater transatlantic cooperation on China. In the wake of the COVID-19 pandemic and the Russian invasion of Ukraine, Washington and Brussels have become acutely aware of the dangers posed by economic overreliance on authoritarian powers. Some experts have pushed back on the use of tariffs as a means of countering China’s market influence, but the fact that both are employing similar approaches is notable in its own right. The two sides should capitalize on this alignment, potentially by organizing regular dialogues on economic policy toward China. If they can seize this opportunity, the transatlantic partnership will be all the stronger for it.

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