China likely to hit back against US, EU with 25% levy on imported cars

Trade tensions between the United States and European Union on the one end and China on the other are all set to escalate further with reports of Beijing considering a 25 per cent levy on imported cars with big engines doing the rounds. The possible retaliation may come in response to the Joe Biden administration decision to hike tariff on a range of Chinese goods coming into the US, including electric vehicles (EVs), as well as an EU probe into subsidies provided by the Chinese government to EVs sold in various European markets.

Bloomberg reports, citing a lobby group, that China is mulling hiking levy on imported cars with large engines in a move that could have an adverse impact on US and European car markets looking at competing in China, the world's largest car market. The lobby group has referred to an interview that an official from China Automotive Technology and Research Center gave to China government-owned Global Times in which he called for a temporary tariff hike on cars with 2.5-litre engines or more.

Automakers like Toyota Motor Corp, Mercedes-Benz Group AG and BMW AG are among those who could be impacted if such a tariff hike is formally announced.

Trade war in the fast lane

China exported around 15 lakh EVs in 2023 to European and North American markets. There is a growing concern among local automakers here that they won't be able to effectively compete against Chinese models that mostly carry lower price tags.

Biden administration recently announced a 100 per cent tariff on imported Chinese EVs, angering officials in Beijing. Even Russia, a key ally of China, waded into the matter with President Vladimir Putin accusing the US of indulging in ‘unfair competition.’

Meanwhile, the concerns in Europe are of a similar nature with manufactures here fearing loss of market share to Chinese car brands. The EU is probing subsidies provided by the Chinese government to Chinese EV companies who are exporting EVs to Europe. This has prompted sharp reactions from China, the world's second-largest economy.

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