China to impose 25% tariff on imported cars with big engines

Trade tensions between the United States, the European Union, and China are poised to escalate further, with reports suggesting that Beijing is considering imposing a 25 per cent levy on imported cars with large engines. This potential retaliation may come in response to the Joe Biden administration’s decision to increase tariffs on a range of Chinese goods entering the US, including electric vehicles (EVs), as well as the EU’s investigation into subsidies provided by the Chinese government to EVs sold in various European markets.

According to Bloomberg, citing a lobby group, China is contemplating hiking the levy on imported cars with engines larger than 2.5 litres, a move that could adversely impact the US and European automakers seeking to compete in China, the world’s largest car market. The lobby group referenced an interview with an official from the China Automotive Technology and Research Center who called for a temporary tariff hike on cars with engines of 2.5 litres or more, as reported by the Chinese government-owned Global Times.

Automakers such as Toyota Motor Corp, Mercedes-Benz Group AG, and BMW AG could be among those affected if such a tariff hike is formally announced.

In 2023, China exported approximately 1.5 million EVs to European and North American markets. Local automakers in these regions are growing increasingly concerned about their ability to effectively compete against Chinese models, which typically carry lower price tags.

The Biden administration’s recent announcement of a 100 per cent tariff on imported Chinese EVs has angered officials in Beijing. Even Russia, a key ally of China, has weighed in on the matter, with President Vladimir Putin accusing the US of engaging in “unfair competition.”

Meanwhile, concerns in Europe are similar, with manufacturers fearing a loss of market share to Chinese car brands. The EU is investigating subsidies provided by the Chinese government to Chinese EV companies exporting EVs to Europe. This has prompted sharp reactions from China, the world’s second-largest economy.