EU enforces 38% tariffs on Chinese electric vehicles; effects on aluminium consumption is in question

On Thursday, July 4, the European Union demonstrated its commitment to fair trade by levying additional tariffs of up to 37.6 per cent on electric vehicles originating from China, alleging ramifications for the domestic market with unfair state subsidies. The European Union took this measure even after Beijing warned of adverse impacts the move might bring, possibly a trade war.

The news came after the European Commission officially announced the tariffs, adding that their initiation would be effective on Friday, July 5.

The European Commission's strategic approach to the issue is evident from its decision to start probing into the impacts of Chinese electric vehicle imports last year. The investigation led the Commission to an interim conclusion that state subsidies for Chinese EV manufacturers undermined European rivals transitioning from thermal to electric power.

However, there is a four-month window during which the tariffs are provisional and open to further discussions between the EU and China. After four months, when the probe concludes, the Commission will propose definite duties applicable for five years, in confidence with 27-member blocs.  

The current duties on Chinese EV imports are 10 per cent, which have been increased to up to 38 per cent in response to widened unfair transactions between the European Union and China. According to European Commission President Ursula von der Leyen, these tariffs are aimed at shielding the soaring inflows of cheap EVs built by state subsidies.

Delving into larger possible impacts, these tariffs will most likely decelerate the consumption of Chinese electric vehicles in EU, as a result of which there will be an anticipated slowdown in Chinese EV production, dampening the usage of aluminium, a key metal used to manufacture electric vehicles for the need of light weighting. According to AL Circle's report: "Future of Aluminium in Transportation Sector - an industry analysis with forecasts to 2027", the EU has made plans to phase out ICE vehicles by 2035, and many countries and regions are likely to follow suit.