Germany is poised to vote against the European Union’s proposed tariffs on Chinese electric vehicles this Friday. This decision comes after significant pressure from industry leaders on German Chancellor Olaf Scholz.

What Happened: Germany had previously abstained from a non-binding vote in July concerning the European Commission’s tariff proposal. The Commission’s plan requires a qualified majority of 15 EU member states, representing 65% of the EU population, to be implemented, Reuters reported on Friday, citing people with knowledge of the matter.

France, Greece, Italy, and Poland are reportedly in favor of the tariffs, which could push the measure through.

The Commission argues that the tariffs are necessary to counteract subsidies such as cheap loans and raw materials, aiming for a level playing field rather than excluding Chinese manufacturers.

However, German carmakers, who derive a significant portion of their sales from China, oppose the tariffs due to fears of retaliatory actions and potential trade conflicts.

The influential German labor union IG Metall and employee representatives from major car manufacturers have issued a joint statement urging Germany to vote against the tariffs, stating, “tariffs are the wrong approach because they will not improve the competitiveness of the European automotive industry.”

Tesla Inc. TSLA has been granted provisional approval by German authorities to expand its Gigafactory near Berlin, a key move that underscores Tesla’s growing presence in Europe’s EV market.

The German Automotive Industry Association (VDA) reports that 1.27 million battery electric and plug-in hybrid vehicles were manufactured in Germany in 2023, making it the second-largest EV producer globally, behind China.

Although China dominates global EV output, most of its vehicles are sold domestically, whereas 76% of German EVs are exported, highlighting Germany’s pivotal role in the international EV market.

Germany’s carmakers are renowned for their engineering excellence, with brands like Volkswagen VWAGY, which owns ŠKODA, SEAT, CUPRA, Audi, Lamborghini, Bentley, and Porsche; Mercedes-Benz Group MBGAF; and Bayerische Motoren Werke AG BMWYY, which owns BMW, MINI, and Rolls-Royce.

See Also: European Telecom Giants Threaten Legal Action Against Elon Musk’s Starlink Over Potential FCC Rule Changes

Why It Matters: The European Union’s decision on tariffs for Chinese electric vehicles has been a contentious issue, with potential repercussions for international trade. The EU aims to protect its automobile industry from the influx of cheaper Chinese EVs, which accounted for 54% of total EV imports to the EU in 2023.

However, this protectionist stance could spark a broader trade war with China, jeopardizing the EU’s export-dependent companies and its EV targets.

China has already approached the World Trade Organization regarding similar tariffs imposed by Canada, highlighting the potential for escalating trade tensions. China’s commerce minister has warned that the EU’s tariffs could significantly disrupt trade, particularly with Germany.

Additionally, Spain’s Prime Minister Pedro Sánchez has called for a reevaluation of the EU’s stance, emphasizing the need for compromise to avoid further trade disputes.

Read Next:

Image Via Shutterstock

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.