- China is considering higher tax levies on imported sedans and SUVs.
- The proposal comes as a reactionary measure towards increased U.S. tariffs and potential EU action.
- European luxury car manufacturers stand to lose out the most.
The West appears to be locked into a trade war with China. The U.S. Trade Representative’s office announced new tariffs on a number of Chinese products last week, including EVs. Meanwhile, the European Union is mulling a similar move as it faces a flood of Chinese imports. Now, China appears to be gearing up for a fight, with signs that similar levies could be applied to imported goods, including cars.
China’s Chamber of Commerce to the EU took to X to release a statement on May 21, warning that “insiders” had revealed that China is considering raising tariffs on imported cars. The letter singles out sedans and SUVs with engines with a displacement of over 2.5 liters as candidates for the increased levies.
Read: Biden Quadruples Chinese EV Tariffs to 100%
The statement referred to the proposed tariffs as “temporary,” and it’s understood that the move would be retaliatory in response to action taken by the U.S. and Europe.
The U.S. is worried that an oversupply of Chinese products, stemming from excess capacity, may threaten American jobs and industry. In addition to keeping existing tariffs imposed by former President Donald Trump, U.S. President Joe Biden announced multiple hikes, which will come into effect on August 1st. This included quadrupling import duties on Chinese EVs from 25 percent to 100 percent.
Meanwhile, the duty on batteries rises from 7.5 to 25 percent, while the tax applied to photovoltaic cells used in solar panels doubles to 50 percent, and some minerals that previously attracted no duty are now faced with a 25 percent tariff.
If China goes ahead with raising tariffs on large-displacement cars, it will increase them from the currently imposed 15 percent to 25 percent, which will comply with World Trade Organization rules. Those impacted the most will be European luxury car manufacturers, such as JLR, BMW, Mercedes, and Audi. Toyota’s Lexus may also be affected, while cars such as the Porsche Cayenne will also likely see a jump in price.
Cars aren’t the only victims in the trade battle. China has also hinted that it may apply similar levies on European food items, such as wines and dairy products. Meanwhile, it has announced an anti-dumping investigation into imports of polyoxymethylene copolymer from the US, EU, Japan, and Taiwan.
