International Trade

Starting on July 4, 2024, the European Union will impose provisional countervailing duties of on average 21 percent on battery electric vehicles (BEVs) imported from China. This decision follows an investigation that found evidence of WTO-incompatible subsidies for Chinese BEVs. The EU is now the last major market to establish new trade barriers against Chinese BEVs. While imports of Chinese vehicles may significantly decrease, the long-term impact on electric vehicle prices is expected to be minimal. It could be particularly advantageous for the EU to now adjust its tariff policies towards other WTO members as well.

Should the EU impose a 20 percent tariff on imports of Chinese electric cars, as speculated, it would have a noticeable impact on bilateral trade and production in Europe. The volume of imported electric cars from China would fall by 25 percent. Converted to the almost 500,000 vehicles imported in 2023, this corresponds to an estimated 125,000 units worth almost 4 billion US dollars. The decline would largely be offset by an increase in production within the EU and a lower volume of EV exports, which would likely mean noticeably higher prices for end consumers. This is shown by simulations by the Kiel Institute.

Although China's importance for the EU's foreign trade is high, it has declined in recent years. The reason for this is that the EU has intensified trade with other countries. In a recent analysis, the Kiel Institute recommends the EU to continue on this course and conclude free trade agreements with countries such as Australia and the Mercosur states. In this way, it could reduce its dependence on China in the face of geopolitical tensions. China currently dominates as a supplier of certain electronic products and raw materials to the EU. If trade were to be disrupted, this would result in high costs in the short and medium term.

The global economy is currently confronted with far-reaching changes, including in particular the ecological transformation and adaptation to climate change, which is promoting regional disparities and conflicts.

Exploring the driving forces and diverse impacts of international development processes, focusing on the global and regional interconnections of countries, companies, and the mobility of people, goods, and capital.

The Research Center “International Finance” investigates the risks and opportunities of financial globalization, including political risks.