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The EU is gearing up for a fight with Beijing over China’s unfair green tech trade practices. Policymakers fear that Europe’s car and wind turbine manufacturers will be wiped out, just as happened with EU solar panel production years ago.

To start addressing this problem, Brussels has resorted to the same tool in both cases: subsidy probes. However, these sectors carry different risks. Large-scale loss of EU employment and industrial decay are the main downsides of excessive dependence on Chinese electric vehicles (EVs). Including Chinese wind energy in EU energy infrastructure is above all a security challenge. Accordingly, the bloc should raise tariff barriers to protect European car manufacturing while keeping Chinese wind energy at bay through diversification of supply and national security exclusions.

Often called the crown jewel of EU manufacturing, the automotive industry provides jobs for nearly 14 million people, representing 6 % of total EU employment. However, as the EU aims to phase out the internal combustion engine, the automotive industry is increasingly facing a threat from Chinese EV imports, which receive generous government support. Chinese EV brands are expected to account for 11 % of the bloc’s EV market in 2024, potentially reaching 20 % by 2027.

To stem the imminent tide of Chinese EVs, the EU needs to respond with bold tariff hikes. Currently, the EU applies tariffs of 10% on all imported cars. The general consensus is that the EU will impose tariffs of anywhere between 10 % and 25 %. However, estimates suggest that tariffs of around 50 % are needed to make the EU less attractive for Chinese EV exports.

Granted, in fear of retaliation, such a decision would be unpopular with countries that export their cars to China or have set up their manufacturing there. In fact, to the dismay of premium carmakers like BMW and Mercedes, Beijing has already signalled it is ready to unleash tariffs as high as 25 % on imported cars with large engines, if the EU imposes additional penalties on Chinese EVs. Meanwhile, Beijing has threatened to target EU agricultural products, showing its willingness to retaliate in other sectors.

Steep tariffs would not protect EU carmakers for long. Chinese companies would likely follow in the footsteps of companies like BYD and build their EV factories in the EU, effectively bypassing trade barriers set by Brussels.

However, tariffs would still give EU carmakers more time to step up their EV game, while the localisation of EV supply chains would prevent job losses, help build competences and keep climate goals within reach. An unwillingness to stomach short-term pains is likely to lead to vastly bigger problems for the EU automotive industry down the road. The EU must act now. The US, Turkey and Brazil have already imposed tariffs. Others countries, like the UK, consider imposing them. Not following suit, would make the EU the central destination for China’s overcapacity.

Europe’s wind industry provides employment too. But more importantly, reliance on Chinese supply chains poses a threat to increasingly important EU energy infrastructure, especially when relations with Beijing continue to deteriorate. For example, for countries around the North Sea offshore wind is fast becoming an important part of the energy mix. Take the Netherlands: The Hague aims to cover 75 % of its current total electricity consumption through offshore wind by 2032. Eight EU member states and Norway agreed to have a joined installed capacity of 76 gigawatts (GW) by 2030 and 260 GW by 2050.

The cost of transportation of enormous wind turbines, blades, and foundations has long been a natural barrier for Chinese parties to enter the EU market. But the playing field is changing: whereas EU wind turbine producers have faced financial difficulties in recent years, Chinese companies rose to the top.

In line with Xi’s ambitions to expand the world’s dependence on China, China locked in its near-monopoly for key components: Beijing banned the export of technologies to extract and separate rare earths and to produce permanent magnets. These are essential materials and components in today’s offshore wind turbines. At present, China produces around 90 % of these magnets. China has the option to halt the exports of the finished magnets at a moment of its choosing. This could threaten the survival of EU offshore wind players.

Depending on more sophisticated China-made products would go hand in hand with greater risks. A magnet is bought once, but complex components rely on maintenance services, software updates and spare parts. China’s 2017 National Security Law forces individual companies to “support, assist, and cooperate with national intelligence efforts”. Dutch intelligence has warned of persistent Chinese cyber-attacks, including the risk that an “attacker builds in the possibility to destroy vital infrastructure.” The service specifically highlighted an uptick in cyber-attacks through management and maintenance software.

To maintain firm control over its energy systems, the EU should reduce its reliance on Chinese supply chains. EU Member States should include clauses in offshore wind tenders that encourage stockpiling of simple components such as permanent magnets and stimulate production outside of China. Banning the inclusion of China’s complex components in the energy network would provide greater protection too. The Netherlands’ exclusion of Chinese parties from substations, key nodes in offshore wind networks, is a good start.

Beijing maintains that its manufacturing base – already the biggest globally – should be transformed into the world’s most advanced too. The EU should protect its firms against China’s unfair competition and looming retaliation. Synchronising the timing of countermeasures with the Americans and other allies can help. But protective measures must not lead to complacency on the side of industry. Innovation and the production of great and affordable products are the only ways EU industries can lead the way towards a cleaner tomorrow.