Markets
European Union Imposes Tariffs on Chinese Electric Vehicles
On Wednesday, the European Union announced a new set of tariffs targeting Chinese electric vehicle manufacturers. Tesla (TSLA) saw a surge of 4.84%, while BYD (1211) experienced a decline of 3.68%, and NIO shares dropped following the EU’s proclamation.
Unfair Subsidies and Tariff Rates
The European Union alleged that Chinese electric car manufacturers were benefitting from unfair subsidies, distorting competition in the market. Consequently, the European Union will impose a 38% tariff on vehicles from companies that did not cooperate with its investigation, and a 21% duty on other Chinese automakers.
The EU’s tariff response to alleged Chinese electric car subsidies aims to level competition fairly, according to Barron’s Print Edition.
Impact on Key Players
Tariff rates vary among Chinese automakers, with BYD facing a 17% duty, Geely (175) 20%, and SAIC a hefty 38%. However, the import tariff for Tesla remains uncertain, given its export from China to the EU.
Stock Market Soars Amidst Economic Optimism
In a scene reminiscent of Voltaire’s Panglossian philosophy from Candide, the stock market continues its upward trajectory.
Analyst Insights
Analysts are divided on the impact of these tariffs. Guggenheim’s Ronald Jewsikow views potential tariffs on Tesla as a “modest negative,” citing potential profit reductions due to increased manufacturing costs. However, Citi’s Jeff Chung believes Chinese EV makers could still attain profitability in Europe, albeit with higher prices and reduced margins.
Global Ramifications
China’s dominance in car exports has sparked reactions worldwide. Turkey announced a 40% tariff on Chinese car imports, while the U.S. quadrupled tariffs on such imports to approximately 100%. These actions reflect concerns over China’s surplus manufacturing capacity and its impact on global markets.
Market Response
BYD shares fell 3.7% in overseas trading, with U.S.-listed NIO and Li Auto ADRs declining 1.2% and 0.7%, respectively. XPeng ADRs dropped 2.9%. Conversely, Tesla stock surged 3.7%, boosting S&P 500 and Nasdaq Composite by 1.12% and 1.81%.
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