What the tariffs on Chinese electric vehicles tell us about the differences in EU and U.S. trade policy
By Jake Edwards
During the first quarter of 2025, the global economy was shaken by the new administration’s decision to impose high tariffs on most goods imported into the United States from nearly all countries on earth, blatantly violating WTO rules. While many were shocked by the unprecedented scale of the administration’s tariffs, they can alternatively be viewed as simply the most recent escalation in the United States’ continuing departure from multilateral rules-based trade governance. This stands in stark contrast to the EU’s approach to trade policy, which remains much more strongly committed to multilateralism despite rising economic and geopolitical tensions. This article examines the difference between EU and U.S. trade policy and the implications of these differences for global trade by looking at the case of the 2024 EU and U.S. tariffs on Chinese electric vehicles (EVs).
Tariff rates and scope
The most apparent difference between the EU and U.S. tariffs is the rates at which they were set. The definitive countervailing duties imposed by the European Commission in October 2024 are limited to EVs and hold rates that vary by each targeted company’s degree of subsidy support. Chinese EV companies without individual tariff rates are classified into two groups: cooperating companies which receive lower tariffs, and non-cooperating companies which receive the highest rate. U.S. tariffs, by contrast, were already set at 25 percent across the board in 2018, but were quadrupled to 100 percent in May 2024. These tariffs apply to all Chinese EV imports into the United States, irrespective of the producing firm’s level of state subsidies. Furthermore, U.S. tariffs were also imposed on other parts of the EV supply chain, including aluminium, EV batteries, and key minerals.
Legal instruments and procedure
These tariff policies can be better understood by looking at the legal instruments used to impose them. Following remarks in September 2023 by Commission President von der Leyen about the flood of unfairly subsidized Chinese EVs on global markets, the European Commission began an anti-subsidy investigation in October 2023. Nine months later, in July 2024, the Commission released provisional results of the investigation, which found evidence of widespread subsidization and announced provisional duties. After disclosing draft findings to interested parties, consultations were held in which companies could present evidence to receive a lower tariff rate. Finally, only after all these procedures did EU Member States vote on and approve the final tariffs. It is worth noting that consultations between the European Commission and the Chinese government are still ongoing, which could lead to the tariffs being scrapped in favor of price undertakings.
U.S. tariffs on Chinese EVs were originally imposed in 2018 under Section 301 of the Trade Act of 1974, which allows the United States to impose tariffs in response to unfair foreign trade practices. These tariffs were due for a statutory review in 2022. In September 2022, the U.S. Trade Representative (USTR) announced that the tariffs would remain in place due to requests for continuation by domestic producers. In May 2024, the USTR announced proposed increases of the tariff rates which were finalized in September 2024. Crucially, there were no opportunities for redress, nor was there any clear reason given for the tariff rate’s 400 percent increase
Rationale
The different legal instruments used by the EU and United States are not only the result of the differing institutional designs of both polities, but also reflect differences in rationale, stated purpose, and economic self-interest. The EU’s anti-subsidy investigation and subsequent countervailing duties were explicitly and solely targeted at mitigating the harm already being caused to EU carmakers by an influx of cheaper and ‘unfairly subsidized’ Chinese EVs. Indeed, Chinese EV companies' market share in the European EV market has grown rapidly over the past few years. Additionally, European carmakers are very active in the Chinese car market, meaning that a disproportionate tariff policy from the EU’s side could provoke a Chinese retaliation and significantly hurt European automotive revenues generated in China. Taking this into account, it is normatively and economically reasonable for the EU to align its tariff procedures with WTO rules. The EU’s stated goal was to even the playing field so that Chinese and EU producers could compete fairly, while avoiding provoking a Chinese retaliation.
The rationale for U.S. tariffs differed starkly from the EU’s. The United States’ primary stated explanation for their tariffs was to put pressure on the Chinese government so that it would end practices related to the forced transfer of U.S. companies’ cutting-edge technologies and intellectual property to Chinese firms. While the United States’ concerns about China’s forced technology transfer policies are shared by others, such as Japan and the European Union, the unilateral approach taken undermines the rules-based order the U.S. claims to uphold. It is worth noting that there is far less trade between the United States and China than between the EU and China, meaning tariffs serve much less of a protective function for domestic U.S. industries, while U.S. carmakers face a far smaller threat of retaliation from China.
WTO Compliance
What has been left unaddressed so far is each tariff policy’s WTO compliance. The EU’s tariff policy has sought to comply with the WTO’s rules on Subsidies and Countervailing Measures, reflected by the specificity of their rates, and the opportunities granted to affected companies so they can demonstrate their subsidy-derived benefits and countervailing duties can be narrowly targeted against these unfair competitive advantages. In contrast, the U.S. tariff policy offered no recourse to Chinese companies, nor any transparency in the determination of tariff levels, thus prioritizing U.S. disputes with Chinese industrial policy over compliance with WTO rules.
The EU has remained committed to rules-based trade, despite increasing politicization of trade from different U.S. administrations. If the United States, as the largest global economy, continues the course of disregarding WTO rules, it risks ushering in a new era of global protectionism and trade wars which could result in economic devastation.
Jake Edwards is a graduate student pursuing dual Master’s degrees in European Union Studies and Russian and Eurasian Studies at Leiden University in the Netherlands. With a passion for languages and a focus on Eastern Europe, his primary area of expertise is Russia and the ongoing war in Ukraine. His academic work centers on international affairs, particularly the dynamics between the EU, Russia, and the broader Eastern European region.
