Tariffs will shape Chinese EV-makers’ strategy

Significance China has responded to the duties via retaliatory probes on EU imports, seeking leverage in negotiations that might settle the dispute. Otherwise, Chinese EV firms face a choice over whether to seek to defend their EU market share through lower profits, accepting losses or offshoring production. Impacts The EU and China are headed for a period of escalating trade tensions and deteriorating bilateral relations. The Kiel Institute for the World Economy, a German think tank, has forecast that a 20% tariff would reduce Chinese EV imports by 25%. The Chinese government will likely threaten retaliatory tariffs on EU automotive agriculture, food and aviation imports. An upside risk could be China pursuing capacity cuts in EV manufacturing as it did for steel in the 2016-17 supply-side structural reform. Some China-based EV makers will increase their EU EV prices to offset the tariffs, increasing consumer costs.