TMTPost -- China may weigh a sharp tariff increase as a senior expert and policy advisor to Beijing suggests the move in response to the U.S. and the European Union’s protectionist actions against China’s electric vehicle (EV) sector.

Credit：CCCEU

China should consider raising the temporary tariff rate on imported cars with engines larger than 2.5 liters, said Liu Bin, chief expert of China Automotive Technology & Research Center and deputy director of China Automotive Strategy and Policy Research Center, in an interview with the state-backed newspaper Global Times published on Tuesday.

As an auto industry insider, Liu has participated in drafting policies for China's auto industry and has been conducting research on the green and low-carbon development of the car industry for the Ministry of Industry and Information Technology (MIIT), which oversees information technology, mail, telecommunications and software industry.

Liu’s suggestion was made to reduce imports as part of China’s broader efforts to cut emissions, promote the green development of the auto industry, and slam actions taken by certain countries and regions against Chinese EVs, the Global Times reported. The expert said that according to WTO rules, China's temporary tariff rate on imported vehicles could be raised to a maximum of 25%, and that such an adjustment is not only in line with WTO rules, but also in line with China's broader efforts to promote the green transition in the auto industry and pursue the goal of reducing carbon emissions.

Liu didn’t specifying countries or regions his proposed tariffs would target, while the report noted his suggestion came as and the EU has initiated anti-subsidy investigation on Chinese EVs and the U.S. has raised tariffs on Chinese imports.

Following the report, China Chamber of Commerce to the EU (CCCEU) issued a note, stating it was informed by insiders that China may consider raising temporary tariffs on EU’s large-engine cars. The business group, which overs 1,000 Chinese enterprises, cautioned the potential tariffs carry implications for European and American automakers, particularly in light of recent developments such as Washington’s tariff hikes and Brussels’ preparation for preliminary measures during its anti-subsidy probe in Chinese EVs.

The White House announced on May 12 that U.S. President Joe Biden directed his Trade Representative to increase tariffs under Section 301 of the Trade Act of 1974 on $18 billion of Chinese imports in order to protect American workers and American companies from China’s unfair trade practices. The Biden administration will sharply ratchet up tariffs on semiconductors, EVs,EV batteries, battery parts, solar cells and steel and aluminum, and impose new tariffs on cranes and medical products. The tariff rate on EVs under Section 301 will increase to 100% in 2024, quadrupling the current tariff of 25%.

The EU officially launched an investigation into EVs from China on October 4 2023.The European Commission is set to decide whether to impose tariffs more than the current 10% standard rate for cars within 13 months once the investigation started. The possible tariff will affect not just Chinese automakers but also foreign brands that produce vehicles there such as Tesla, Renault and BMW. The probe may result in tariffs close to the 27.5% level already imposed by the U.S. on Chinese EVs, Bloomberg reported last September.

The European Commission President Ursula von der Leyenan suggested recently she would diverge from the U.S. on tariffs. “We share some of the concerns of our [US] counterparts but we have a different approach, a much more tailored approach,” von der Leyen said on Tuesday. Head of the EU’s main executive body stressed should a months-long EU investigation be confirmed Chinese subsidies exist, she can guarantee the level of the duties EU would impose is correspondent to the level of damage.

The recent U.S. tariff hike will only significantly drive up the cost of imported goods, inflict more loss on American companies and consumers, and make the US consumers pay even more,  Chinese Foreign Ministry spokesperson Wang Wenbin commented last week. 92% of the cost for the tariffs hike falls on American consumers and average US household expenditure increases by 1,300 dollars annually, Wang quoted Moody’s estimates. Wang said China urges the U.S. to earnestly observe WTO rules and immediately cancel the additional tariffs. He reiterated Beijing will take all measures necessary to defend its rights and interests.