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EU tariffs on Chinese-made EVs to take effect Thursday

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EU members divided over tariffs in vote on Oct. 4

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China has own investigations into EU brandy, dairy, pork

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Brussels, Beijing to continue negotiating possible

alternative

(Updates with German Economy Ministry comment in paragraphs

13-14)

By Philip Blenkinsop

BRUSSELS, Oct 29 (Reuters) - The European Union has

decided to increase tariffs on Chinese-built electric vehicles

to as much as 45.3% at the end of its highest profile

investigation that has divided Europe and prompted retaliation

from Beijing.

Just over a year after launching its anti-subsidy probe, the

European Commission will set out extra tariffs ranging from 7.8%

for Tesla to 35.3% for China's SAIC, on top of the EU's standard

10% car import duty.

A senior EU official said the extra tariffs had been

formally approved on Tuesday. The new rates are set to be

published in the EU's Official Journal later in the day or on

Wednesday. They will take effect the following day.

The Commission, which oversees EU trade policy, has said

tariffs are required to counter what it says are unfair

subsidies including preferential financing and grants as well as

land, batteries and raw materials at below market prices.

It says China's spare production capacity of three million

EVs per year is twice the size of the EU market. Given 100%

tariffs in the United States and Canada, the most obvious outlet

for those EVs is Europe.

Beijing has called the EU tariffs protectionist and damaging

to EU-China relations and automotive supply chains, and has

launched its own probes this year into imports of EU brandy,

dairy and pork products in apparent retaliation.

It has also challenged the EU's provisional measures at the

World Trade Organization.

European automakers are grappling with an influx of

lower-cost EVs from Chinese rivals. The Commission estimates

Chinese brands' share of the EU market has risen to 8% from

below 1% in 2019 and could reach 15% in 2025. It says prices are

typically 20% below those of EU-made models.

The EU's stance towards Beijing has hardened in the last

five years. It views China as a potential partner in some areas,

but also as a competitor and a systemic rival, but EU members

are not united on EV tariffs.

Germany, the EU's biggest economy and major car producer,

opposed tariffs in a vote earlier this month in which 10 EU

members backed them, five voted against and 12 abstained.

Germany's economy ministry said on Tuesday Berlin supported

ongoing EU negotiations with China and hoped for a diplomatic

resolution to mitigate trade tensions while protecting EU

industry.

"The Federal Government stands for open markets. Because

Germany in particular, as a globally interconnected economy, is

dependent on this," the spokesperson added.

German carmakers have heavily criticised the EU measures,

aware that possible higher Chinese import duties on

large-engined gasoline vehicles would hit them hardest.

The measures come as thousands of German industrial workers,

including at the carmakers, strike for higher wages, with

Volkswagen possibly about to announce shutting

plants on home soil for the first time in its 87-year history.

Hungarian Prime Minister Viktor Orban said the EU was headed

for an "economic cold war" with China.

However, France's PFA car association has welcomed duties,

adding it backed free trade as long as it was fair.

The Commission has held eight rounds of technical

negotiations with China to find an alternative to tariffs and

said talks can continue after tariffs are imposed.

The two sides are looking at possible minimum price

commitments for imported cars and agreed on Friday to hold a

further round, although the Commission said there were

"significant remaining gaps".

It remains to be seen what impact tariffs will have on

consumer prices. Some producers may be able to absorb them at

least partially.

In the first nine months of 2024, China's EV exports to the

EU were down 7% from a year earlier, but they have surged by

more than a third in August and September, ahead of the tariffs,

data from the China Passenger Car Association (CPCA) show.