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Cheap State-sponsored Chinese cars targeted by EU regulators.

Fears Grow of Auto Trade War Between China and EU

Retroactive tariffs could slam Chinese automakers receiving unfair government support.

Fears of an escalation of trade tension between the European Union and China grow with the prospect of several Chinese vehicle imports being retroactively hit by swinging tariffs.

These concerns follow the European Commission's publishing this week of a document in which it claims there is sufficient evidence to show Chinese-made battery-electric vehicles are being subsidized, Reuters reports.

If found guilty of receiving unfair government support, these automakers could face retroactively applied tariffs as customs registration now gets under way. The Commission notes vehicle imports from China into EU markets increased 14% year-on-year since its investigation into anti-subsidy imports was formally launched in October.

The probe is due to conclude by November, although the EU could impose provisional import duties on automakers in July. Already the Commission says European automakers could suffer irreparable harm should unfairly subsidized Chinese vehicles continue to flood the markets with cheaper products at an accelerating rate before the conclusion of the investigation.

The China Chamber of Commerce to the EU says it is disappointed by the move and the surge of imports raises the specter of a tariff war between the two trading blocs, a war that would especially hurt the German brands with extensive manufacturing facilities in China.

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