European Automakers criticized the European Union (EU) for imposing tariffs today on Chinese electric vehicles (EVs). 

Mercedes Benz AG called them a "mistake," saying "punitive tariffs worsen the competitiveness of an industry in the long term." BMW AG said the move marked a "fatal sign" for Europe's auto industry, Reuters reported. 

Volkswagen Group said that duties were "the wrong approach and would not improve the competitiveness of the European automotive industry." 

Following the news, European carmakers rose, with Mercedes-Benz (OTC:MBGAF) and BMW (OTC:BMWKY) being the best performers, rising 1.06% and 2.04%, respectively.

European automakers’ stock performance, source: TradingView

EU Votes For Tariffs Against European Automakers

The EU voted in favor of adopting definitive tariffs of up to 45% on China-made battery electric vehicles (BEVs).

"The European Commission's proposal to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China," the EU said in a statement. It "obtained the necessary support from EU Member States for the adoption of tariffs," it said. 

"This is good news: the tariffs make economic sense," Nils Redeker, Deputy Director Jacques Delors Institute, wrote on X. This shows that "the EU knows how to flex its strategic trade muscles when it counts," he wrote. 

The EU said in the statement that it would continue to hold talks with China to resolve the differences. 

But a solution will need to be "adequate in addressing the injurious subsidization established by the Commission's investigation," the EU said. It must also be fully WTO-compatible, "monitorable and enforceable."

European Automakers Opposed Tariffs Before EU Vote

Ahead of the vote, last-minute talks to avert the tariffs failed. The EU's Commissioner for Trade, Valdis Dombrovskis, and China's Minister of Commerce, Wang Wentao, met on September 19. 

The EC imposed provisional tariffs on China's EVs in July despite Beijing's previous warning that it would retaliate. 

Beijing has denied that it improperly subsidizes EV companies, arguing that its leading role in EVs results from efficient manufacturing. 

Ahead of the vote, Mercedes-Benz and BMW called on Berlin to veto on tariffs to avoid a spat with their most important market. 

European automakers have struggled with weak overseas demand, issues in China and the United States. 

China has nearly halved its imports of German cars in the past five years as competition with its domestic automakers increases. 

Swedish automaker Volvo Cars said today that it would "continue with our long-held strategy of building our cars where we sell them." 

Volvo, which is owned by China's Geely Holdings, said it "committed significant long-term investment into Europe," according to a statement.

European Nations Split On Tariffs

EU members disagreed on whether to levy tariffs for the next five years. Spain had called on the EU to “rethink” the duties, aligning with Germany, while France supported them.

The vote highlighted differences in Europe regarding member states' trade relations with China, the bloc's second-largest export market in 2023.

Source: European Commission

Ten EU member states voted in favor of the tariffs, while 12 abstained and five opposed, including Germany, Euronews reported. Spain abstained from voting. 

German's vote was "a powerful exhibit that Draghi’s diagnosis is right," Lucas Guttenberg, Bertelsmann Stiftung Senior Advisor, posted on X. 

He referred to the September 9 European competitiveness report by Mario Draghi , former European Central Bank President.  

"If not even the Commission and the largest auto manufacturer see eye-to-eye on how to deal with the EU’s car industry, then the EU has no consistent industrial strategy," he wrote. "And that has to change."

German Vote Against Tariffs Could Hurt Scholz

The decision could also blow back against German Chancellor Olaf Scholz. 

Scholz recently avoided an electoral setback in the eastern state of Brandenburg. His Social Democrats narrowly won elections last month against the far-right Alternative for Germany. 

The "fatal decision" to force "a German No vote" against the tariffs "hurts Germany’s broad industrial interests," Reinhard Bütikofer, a former Germany Green Party leader, said. 

"It is also a major mistake in geopolitical terms: Germany opts for caving in under lobby pressure from Beijing," he wrote on X.

The EU will publish the implementing regulation and findings of its investigation on China’s subsidization of the industry by October. 30.

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