German economists split over EU tariffs on EVs from China as duties kick in

German economists are split on whether additional EU tariffs on electric cars from China are needed or appropriate, a survey by the Institute for Economic Research (ifo) found. A third of the 162 participants in the ifo Economists Panel believe extra tariffs are "exactly what is needed" to counteract subsidies from the Chinese government, while the same number is against the tariffs, largely citing the risk of an impending trade war. Moreover, 11 percent support lower countervailing tariffs, while six percent want higher ones. "Dealing with China is challenging. Geopolitical risks, responses to China's economic and export strategy and the maintenance of free trade must be weighed against each other," Niklas Potrafke, director of the ifo Centre for Public Finance, said.

Economists were also split on subsidies on other industries as a way to reduce dependencies on China, as well as on whether the country is a partner, an economic competitor or systematic rival, or geopolitical adversary. The vast majority (88%) says that Germany's foreign trade dependence on China is "high" or "very high", while 63 percent believe the same for the EU.

The European Commission imposed additional duties on imported Chinese electric cars on 4 July in a bid to protect Europe’s car industry from what it says is unfair competition. According to simulations by the Kiel Institute for the World Economy (IfW), Chinese e-car imports would fall by 42 percent as a result of the tariffs. However, this would be largely offset by higher sales by European producers and higher imports from third party countries, the researchers said. Car prices would only slightly be affected in the long term. To ensure prices for electric vehicles remain affordable, the EU could reduce import duties on World Trade Organisation member states with which the union does not yet have a free trade agreement, IfW said. "If the EU reduces these tariffs on battery-powered electric vehicles to zero [from the current 10 percent], prices in the EU could fall by up to 0.8 percent."

The European Commission's move follows an investigation which found evidence of subsidies inconsistent with the WTO for Chinese electric vehicles. The German government has been critical of the move, saying additional tariffs will also affect Western carmakers with electric car production sites in China. The country's car industry also called the tariffs “the wrong instrument” and said they would slow the transition to clean mobility.