Trade tensions between China and the European Union continue to mount as the European Commission proceeded with imposing definitive tariffs on Chinese battery electric vehicles (EVs) on 4 October, despite a highly divided vote from member states. In another trade-related move, the Commission announced on 27 September the restriction of Chinese companies' access to the upcoming second subsidy auction of the European Hydrogen Bank.

The decision to impose tariffs on electric vehicles was first unveiled this summer after a thorough investigation launched by the European Commission in October 2023. The probe, which covered the entire value chain and focused on three Chinese producers—BYD, Geely, and SAIC—found that Chinese EVs were benefitting from unfair subsidies, threatening the EU’s economy and competitiveness. The current provisional duties, which vary by company and depend on their cooperation with EU authorities, range from 9% to 36.3%, in addition to the EU’s standard 10% car import duty. These tariffs are set to remain in place until the end of the month, when final duties, ranging from 7.8% to 35.3%, will come into force.

While large countries such as Germany and Spain had publicly adopted a more conciliatory stance towards China, observers expected an easy vote in favour of the tariffs. However, only ten member states, representing 46% of the EU population, voted in favour of the tariffs. Twelve others abstained, and five voted against, leading to a deadlock. Though the majority was not convinced, the proposal could only have been blocked by a qualified majority of 15 EU countries representing 65% of the EU's population.

This led the European Commission, which holds exclusive powers over the Union’s trade policies, to proceed with the tariffs. The definitive measures will be enforced for five years, with potential extensions. However, further discussions may take place later, with ideas such as imposing a minimum import price or commitments to invest in Europe gaining traction.

In a related move, on 27 September the European Commission released the anticipated conditions for the European Hydrogen Bank’s second auction, which aims to provide up to €1.2 billion in grants for new renewable hydrogen projects, set to launch in early December. According to the new terms, prospective projects will not be allowed to source more than 25% of electrolyser stacks—covering surface treatment, cell unit production, and stack assembly—from China.

The decision, generally welcomed by industry representatives, follows the bank’s allocation of nearly €720 million to seven renewable hydrogen projects during its first auction, which sparked concerns about the winning projects’ over-reliance on cheap Chinese-made products. At a time when China already accounts for more than 50% of global electrolyser manufacturing capacities, the updated terms seek to mitigate the growing risks of dependency on Chinese imports, aligning with both the Green Industrial Deal's Net-Zero Industry Act and the recommendations of the recent Draghi report.