The European Union is moving closer to imposing additional tariffs on Chinese electric vehicles entering the bloc, citing new proof that the government in Beijing is providing illegal financial support for the industry.

The European Commission, the EU executive’s arm, said this week it has found “sufficient evidence” that the imports of new battery electric vehicles from China received subsidies including direct transfer of funds, tax breaks, or public provision of good or services below market prices.

The EU launched the inquiry in October, meaning provisional tariffs would need to be introduced by July, with definitive duties hitting by November. In recent probes of other sectors such as e-bikes and fiber-optic cables, the EU discovered subsidy margins ranging from 4% to 17%.

The investigation is part of a broader EU effort to protect supply lines and bring production closer to home, particularly in key sectors like semiconductors and pharmaceuticals. The announcement tested already fragile relations with Beijing, which subsequently launched its own anti-dumping investigation into brandy imported from the EU, a move seen as a retaliation against France, which supported the electric-vehicle probe.

The commission said it found evidence of massive imports of the Chinese vehicles in a relatively short period of time, including a “substantial increase” of 14% since the investigation was launched compared with the prior year, according to the regulation published March 5.

“At this stage it is possible that, on the basis of the data collected during the investigation, the injury, which would be difficult to repair, started to materialize even before the end of the investigation,” according to the document.

The EU warned that manufacturers could suffer from diminishing sales and production levels if the imports of Chinese electric vehicles continued at the current levels. China exported about $12.7 billion of electric vehicles to the EU in 2023 through November.

As a result, the commission has instructed customs authorities to start registering the import of the electric vehicles from China so they may be subject to the countervailing duties decided at the end of the investigation retroactively from this date to repair the injury already caused.

The China Chamber of Commerce to the EU voiced its disappointment with the proposed mandate for customs registration and expressed worries regarding potential retroactive measures. It said the recent surge in imports reflected increasing demand in Europe.

EU investigators have sampled a number of Chinese brands that they say best reflect the subsidies the sector has allegedly received. Those firms could be hit with higher tariff rates, while other exporters such as Tesla Inc. and other European companies could face an average of those duties.

The EU inquiry doesn’t name specific producers, but the probe will focus on all manufacturers in China that export to the EU, including Tesla and major Chinese brands such as BYD Co., SAIC Motor Corp. and Nio Inc.

The trade tensions come as the EU toughens its economic stance toward Beijing, with the bloc increasingly wary of China’s use of massive public support in critical sectors.

If the EU does impose duties, that would curtail one of the last major markets for Chinese EV exports, and raises the prospect of a cascade of defensive moves in places like the UK to protect their markets being flooded by vehicles redirected from the EU.

Senator Rubio seeks stiffer tariff to stop China 'flooding US auto markets'

China's BYD launches Dolphin Mini EV in Mexico

Republican U.S. Senator Marco Rubio on Tuesday proposed sharply boosting tariffs on Chinese vehicle imports by $20,000 to stop the country "from flooding U.S. auto markets," Washington's latest effort to protect American automakers and auto workers.

Rubio, top Republican on the Senate Intelligence Committee, said he is also proposing legislation to extend tariffs to vehicles produced by Chinese automakers in other countries like Mexico and limit subsidies for electric vehicles to those that meet stringent North American free trade rules.

Rubio said the flat tariff would address the disproportionate advantage of lower-end Chinese autos and close loopholes that reduce the amount paid and "safeguard American automakers and workers against the influx of artificially cheap vehicles from China."

With national elections coming in November, Democratic President Joe Biden and leaders of both parties in Congress are backing steps to limit Chinese electric vehicle imports.

"America’s existing tariffs, once effective, are now insufficient to counter China’s newest strategies," Rubio said, calling for "a multi-pronged effort to prevent the Chinese Communist Party from entering the American auto market before it is too late."

The issue has received new interest after news reports that China's BYD plans to set up an EV factory in Mexico. BYD, known for its cheaper models and a more varied lineup, recently overtook its biggest rival, Tesla, to become the world's top EV maker by sales.

Last week, the White House said it was opening an investigation into whether Chinese vehicle imports pose national security risks and could impose restrictions due to concerns about "connected" car technology.

"China's policies could flood our market with its vehicles, posing risks to our national security," President Joe Biden said in a statement. "I’m not going to let that happen on my watch."

Senator Gary Peters, a Michigan Democrat, praised the investigation saying "there’s no place in the U.S. for vehicles made by Chinese Communist Party backed companies."

There are relatively few Chinese-made light duty vehicles being imported into the U.S. On Friday, the Chinese foreign ministry said Chinese cars were popular globally not because of "so-called unfair practices" but because they had emerged out of fierce market competition and were technologically innovative.

Last month, a U.S. manufacturing advocacy group warned that low-cost Chinese autos and parts from Mexico "could end up being an extinction-level event for the U.S. auto sector."

Last week, Republican Senator Josh Hawley introduced legislation to raise the base tariff rate on Chinese imports to 125% from 27.5% currently. The measure also seeks to apply a 100% tariff hike to vehicles assembled in Mexico by Chinese-based automakers.

Sen Hawley wants Biden to hike tariffs on Chinese energy imports

Sen Hawley wants Biden to hike tariffs on Chinese energy imports

Sen. Josh Hawley, R-Mo., wants President Biden to increase tariffs on any imported energy components from China, a week after he introduced another bill that would hike tariffs on Chinese electric vehicle imports.

"President Biden’s climate agenda undermines U.S. energy independence and will make us more reliant on China," Hawley told Fox News Digital in a statement. "We can’t afford energy policies that enrich our greatest adversary at the expense of American workers here at home. It’s time to declare our energy independence from China—and we can start by raising tariffs on China's green energy sector."

Tariffs are taxes or duties imposed by a government on imported or exported goods.

Hawley will introduce a new bill on Tuesday called the Declaring Our Energy Independence from China Act. It would require the president to apply additional tariffs on all battery components, solar energy components and wind energy components imported from China at a 25% rate.

The president could increase the rate by 5% annually for the next five years, peaking at 50%, according to the bill.

Since former President Trump's term, the average U.S. tariffs on Chinese imports remain at approximately 19.3%, according to an estimate from the nonprofit research group Peterson Institute for International Economics.

The bill would also require a report on subsidies China provided to its battery, solar and wind energy sectors over the past 15 years, including direct fund transfers, tax breaks and preferential access to resources.

Last year, Biden halted tariffs on solar imports for two years. A bipartisan Congressional Review Act resolution was passed to end the pause, but the president vetoed it.

Biden also introduced mandates to transition American manufacturers and workers toward electric vehicles (EVs), targeting two-thirds of all U.S. automobiles to be EVs by 2032.

According to a U.S. Department of Defense report last summer, China controls most renewable energy equipment production and material supply chains.

Hawley is not the only one concerned about China dominating the U.S. energy industry. In January, a group of bipartisan senators sent a letter to Biden urging him to increase tariffs on Chinese imported solar panels.

"By 2026, China will have enough capacity to meet annual global demand for the next ten years," Sens. Marco Rubio, R-Fla., Jon Osoff, D-Ga., Raphael Warnock, D-Ga., and Sherrod Brown, D-Ohio wrote. "This capacity is an existential threat to the U.S. solar industry and American energy security."

Last week, Hawley proposed a bill to boost the current 2.5% tariff on vehicles to 100%, effectively increasing the overall tariff on all Chinese automobile imports from 27.5% to 125%.