The European Union faces a significant challenge as member states debate whether to impose additional tariffs on Chinese-built electric vehicles (EVs). This decision signals a rift within the bloc amid threats of retaliation from Beijing.

Germany, whose carmakers heavily rely on the Chinese market, opposes the tariffs. Conversely, France has emerged as a staunch advocate. An informal Reuters poll indicates a majority of EU countries remain undecided, assessing the benefits and drawbacks of the escalating trade dispute.

The matter will soon go to an advisory vote, marking the first official gauge of support in this landmark case. Notably, this investigation was initiated by the EU without an industry complaint, a first in trade cases of this nature.

The European Commission plans to confirm provisional duties of up to 37.6 percent on Thursday, targeting Chinese brands like BYD, Geely, and SAIC, as well as China-manufactured models of Tesla, BMW, and other Western automakers. In October, EU members will vote on imposing multi-year tariffs based on the investigation’s outcome. These tariffs can be blocked if a ‘qualified majority’ – at least 15 countries representing 65 percent of the EU population – opposes them.

France, Italy, and Spain, representing 40 percent of the EU population, have indicated support for the tariffs. Spain’s economy ministry emphasized the need for Europe to defend itself if local companies are disadvantaged and competition is unfair.

Meanwhile, the Czech Republic, Greece, Ireland, and Poland are still debating the issue. Belgium’s caretaker government and the Netherlands’ newly formed government have yet to take a stance.

Germany advocates for a negotiated resolution with Beijing. German automakers argue that tariffs could have adverse effects, potentially increasing the cost of EVs and undermining the EU’s carbon-neutral goals. Tesla has announced it will raise prices if tariffs are imposed.

Potential Chinese retaliation could include tariffs on EU exports like cognac, pork, or luxury cars. The European Commission maintains that the proposed duties aim to counteract Chinese subsidies and ensure a level playing field, not exclude Chinese car manufacturers.