Supply Chain Matters highlights this week’s decision by the European Union to impose added import tariffs on China produced electric vehicles. The move complicates industry sourcing dynamics and provides added supply network challenges for cost and resiliency.



Last month Supply Chain Matters published an editorial commentary with highlights, perspectives and likely implications of an announcement by the Biden Administration in imposing increased import tariffs on specific goods.

These actions reportedly were carefully targeted at strategic sectors—the same sectors where the U.S. is making investments to enhance domestic sourcing and production within noted strategic and economic industry areas.

The added or new U.S. import tariffs involved strategic product areas that included:

  • Steel and aluminum
  • Legacy semiconductor devices
  • Electric powered vehicles
  • Batteries, battery compounds and critical materials
  • Solar devices
  • Medical products

At the time of the announcement, the Biden Administration was hopeful that this U.S. import tariff action would prompt European nations to add their own import tariff actions for these specific or other supply network or production areas.

Europe Initiates Added Import Tariffs

This week provides reports indicating that the European Union will itself initiate additional import tariffs, upwards of over 38 percent in one specific case, on electric powered vehicles produced in China.

According to reporting by Bloomberg, these tariffs are individualized to certain China based producers, following an investigation by EU staffers that started in 2023.

As an example, duties on producer BYD would ne 17.4 percent which SAIC would be 38.1 percent. The latter reportedly had not cooperated with the EU investigation, hence the high tariff rate. The current rate of import tariffs related to China based vehicles is 10 percent.

As Supply Chain Matters has noted in recent commentaries related to China, the country’s EV producers, which are considerably many domestic producers chasing existing saturated domestic market demand, have been aggressively exporting vehicles to other potential growth markets including European countries.

Similar to the recent U.S. announcement, China has signaled retaliatory actions reportedly including agriculture, aviation, autos and other imported products from the EU. A similar threat was made in response to the U.S. announcement.

Complications and Stakeholder Interests in Global Trade

As our Supply Chain Matters readers are acutely aware, global trade involves access and competitiveness among global markets including China.

European mass market auto producer Volkswagen, luxury auto producers such as BMW and Mercedes, and other producers have positioned China not only for the low cost production of auto supply components, but also focus on China’s vast domestic market for a meaningful revenues and profitability.

The Wall Street Journal, in its reporting of the EU tariff action (Paid subscription) placed a special emphasis on Germany, both the EU’s largest auto market and producer of vehicles and components. Responding to this latest EU action, this report noted that given these interrelationships, “Germany won’t decouple from Chinaand has been “actively lobbying Brussels against them.

At the same time, China based EV producers are seeking to invest in production facilities within Europe as a basis of nearshoring for access to the continent’s auto market. The Journal report specifically indicates that BYD announced plans to build a Telsa like Gigafactory in Hungary while “producer Chery has created a joint venture with Spain’s EV Motors to assemble vehicles in Barcelona.”

In its reporting Bloomberg pointed out that Tesla which exports its Model 3 vehicles from its Shanghai production facility to the EU, along with BMW and Renault that similarly source EV production in China for shipment to the EU will now be subject to increased import tariffs with these actions.

Implications for Multi-Industry Sourcing and Supply Chain Strategies

As noted in our prior commentary, industry supply network teams that have already assessed and/or undertaken a China Plus sourcing approach, these tariff actions are a further reinforcement that existing geo-political landscapes need to continue to be reference and weighting toward supply network resiliency and market access strategies.

The increased concerns cited by a number of countries, including Europe, in respect to China’s aim to significantly dominate and increase exports of EV autos and other key products have political and economic policy consequences. In a year of major Presidential, parliamentary  and legislative elections, the protection of strategic industries that support employment growth such as autos, serves as a voter incentive.

We again reiterate that business executives sometimes tend to dismiss either domestic or geo-political events as a point in time development. Over the past five years, some have done so in the belief that China will always be to go-to supply network from the sheer nature of that country’s supplier networks, production and logistics infrastructure. There are now more forces at-play and business executives, and their supply network sourcing teams need more than ever to institute product demand and supply resiliency efforts. The notion is one of regionalization, a strategy that matches specific geographic product demand with regionalized supply networks that can support revenue and product needs.


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