FRANKFURT, Germany (AP) — The European Union has finalized its sharply rising customs duties on electric vehicles imported from China. Electric vehicles are the latest flashpoint in a broader trade dispute over Chinese government subsidies and growing exports of products from Beijing. green technology to the bloc of 27 nations.

The duties came into force provisionally in July and were finalized after negotiations between the EU and China failed to resolve their differences. Negotiations are expected to continue and the EU could lift the duties if a deal is reached.

Here are some basic facts about EU customs duties:

What has the European Union done?

The European Commission, the EU’s executive body, conducted an eight-month investigation and concluded that companies making electric cars in China benefit from massive government aid that allows them to undercut competitors’ prices in the EU, to take a significant market share and threaten European jobs. .

The rights differ depending on the manufacturer: 17% for BYD, 18.8% for Geely and 35.3% for the public company SAIC. Other electric vehicle makers in China, including Volkswagen and BMW, would be subject to a 20.7% duty. The commission has a rate calculated individually for Tesla by 7.8%.

“By adopting these proportionate and targeted measures after a rigorous investigation, we are defending fair market practices and the European industrial base,” said European Commission Executive Vice-President Valdis Dombrovskis.

The rights will remain in effect for five years, unless an amicable solution is found.

Why did the commission act?

Electric cars made in China increased from 3.9% of the electric vehicle market in 2020 to 25% in September 2023, the commission said.

The commission says Chinese companies have achieved this through subsidies along the production chain, from cheap land for local government factories to below-market supplies of lithium and batteries from state-owned enterprises, through tax breaks and financing at lower interest rates. from state-controlled banks.

The rapid growth in market share has raised fears that Chinese cars could ultimately threaten the EU’s ability to produce its own green technology needed to combat climate change, as well as the threatened jobs of 2.5 million workers in the automobile industry and an additional 10.3 million people. whose jobs indirectly depend on the production of electric vehicles.

Subsidized solar panels from China have wiped out European producers – an experience European governments do not want to see repeated with their auto industry.

Unusually, the commission acted alone, without any complaints from the European auto industry. Industry leaders and Germany, where BMW, Volkswagen and Mercedes-Benz are based, have opposed the tariffs. Indeed, many of the cars that will be hit with tariffs are made by European companies, and China could retaliate against the auto industry or in other areas.

How is China reacting?

Beijing sharply criticized the investigation and the higher obligations, calling them protectionist and unfair.

The Commerce Ministry also launched anti-dumping investigations into European brandy and pork exports and an investigation into dairy subsidies. Earlier this month he announced provisional rates from 30.6% to 39% on French and European spirits, after EU member countries voted in favor of finalizing tariffs on electric vehicles.

Officials also said they were considering whether to raise tariffs on imports of gasoline-powered vehicles with large engines.

Discussions between the two sides have focused in recent weeks on so-called “price commitments” as a possible solution. In such a scenario, car manufacturers would agree to a minimum sales price for their electric vehicles in Europe.

Some Chinese automakers are considering manufacturing cars in Europe to avoid tariffs and get closer to the market. BYD is building a factory in Hungary, while Chery has a joint venture to build cars in the Spanish region of Catalonia.

How do EU tariffs compare to those announced by the US?

The Biden administration is increase prices on Chinese electric vehicles at 100% compared to 25% currently. At this level, US customs duties block virtually all Chinese imports of electric vehicles.

This is not what Europe is trying to do.

EU officials want affordable electric cars imported from abroad to meet their goals of cutting greenhouse gas emissions by 55% by 2030 – but without the subsidies that EU leaders see as competition unfair.

The planned tariffs aim to level the playing field by approximating the scale of excessive or unfair subsidies enjoyed by Chinese automakers.

European countries also subsidize electric cars. The question in trade disputes is whether the subsidies are fair and accessible to all automakers or whether they distort the market in favor of one party.

What does this mean for European drivers and car manufacturers?

It is unclear what impact these duties will have on car prices. Chinese automakers are able to make cars so cheaply that they could absorb the tariffs in the form of lower profits instead of raising prices.

Currently, Chinese automakers often sell their vehicles abroad at much higher prices than in China, meaning they prioritize profits over market share, despite their recent market gains. According to Rhodium Group calculations, five of the six BYD models would still make a profit in Europe, even with a 30% tariff.

BYD’s Seal U Comfort model sells for the equivalent of 21,769 euros ($23,370) in China but 41,990 euros ($45,078) in Europe, according to Rhodium. The basic model of BYD’s compact seagullwhich is expected to arrive in Europe next year, sells for around $10,000 in China.

Although consumers could benefit from cheaper Chinese cars in the short term, allowing unfair practices could potentially mean less competition and higher prices in the long term, the commission says.

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Moritsugu reported from Beijing.

David Mchugh and Ken Moritsugu, Associated Press