ROB SCHMITZ, HOST:
Leaders here in Europe say they're ready to join the U.S. in imposing tariffs on electric vehicles from China. That's because China's government heavily subsidizes its electric vehicle industry, making those vehicles cheaper than American and European cars. Scott Kennedy joins me now to explore whether these new tariffs will work as intended. He's the senior adviser on Chinese business and economics at the Center for Strategic and International Studies, a bipartisan think tank. Good morning, Scott.
SCOTT KENNEDY: Good morning.
SCHMITZ: So the European Commission plans to impose tariffs of around 38% on Chinese electric vehicles. This comes after the U.S. put tariffs of up to 100% on Chinese electric vehicles. Does this leave some room for Chinese automakers to sell in Europe still?
KENNEDY: It still does. The actual tariffs will range between 17% for BYD, China's best producer, all the way up to 38% for smaller companies. The Chinese receive so much subsidies, their prices are so inexpensive that they'll still be able to export to Europe. This is a moderate speed bump to Chinese companies. It doesn't effectively entirely block them from the market.
SCHMITZ: And why do you think it was at that rate? Why did they keep that low?
KENNEDY: Well, I think partly it's an evaluation of what Chinese subsidies actually are. We've calculated that they were somewhere last year about 46 billion altogether, which comes in at around 11 1/2% of the value of total sales that they made. And also, you have complex politics. You have auto - or European auto makers that produce in China, that also cooperate with Chinese auto and battery makers, and you have different interests amongst the European countries. And so I think they aim for something somewhere in the middle that would be acceptable by most of the member states.
SCHMITZ: Yeah, I mean, you mentioned BYDs. You know, I'm seeing more and more Chinese-made BYDs and Neos and other vehicles every day here on the street, here in Berlin. Are Chinese automakers going to be able to get around these tariffs by simply building factories in the EU? I mean, we're already seeing that. BYD has a plan to build one in Hungary.
KENNEDY: Sure. Yes. And that is part of the EU's strategy, unlike the U.S., which I think is not really interested in having Chinese automakers build plants around the United States. I think the EU would be OK with that. And you already see, as you said, Chinese factories in Hungary and going up in other countries, as well as Chinese battery makers to supply them. And so that's the most likely outcome down the road is less cars delivered from China, but Chinese cars built in the EU with European workers for the European market.
SCHMITZ: And of course, that helps the labor market here in Europe. You know, I've covered this story from this side of the Atlantic. The French were pushing for these tariffs, much to the chagrin of Germany, whose automakers have a far larger market share in China than French car makers. Berlin is really worried about its companies getting punished for this. What kind of retaliatory action from China can German automakers expect?
KENNEDY: Well, we'll have to see. The Chinese are hesitant to impose really strong penalties 'cause they still want to maintain the relationship. They still need access to technology in other fields, and European and American restrictions can go up. But we might - the Chinese have hinted that they might investigate or put restrictions on SUVs from Europe and the United States or launch investigations into other products. I think a lot will depend on what the final tariffs are from the EU, and what happens in U.S. elections to affect what Chinese overall strategy will eventually be.
SCHMITZ: That's Scott Kennedy. He's a senior adviser on Chinese business and economics at the Center for Strategic and International Studies. Thanks, Scott.
KENNEDY: You're welcome. Transcript provided by NPR, Copyright NPR.
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