Shareholders of Chinese electric vehicle (EV) stocks like Nio (NYSE:NIO), Li Auto (NASDAQ:LI) and XPeng (NYSE:XPEV) will want to mark their calendars for July 4. That is the day when provisional European Union duties between 17.4% and 38.1% on imported China-made EVs are set to become active. This would supplement an existing 10% duty on the vehicles.
Provisional duties can be active for up to four months. Afterwards, the EU will decide on whether it will enact final, or definitive, duties. The EU’s deadline for its provisional duties on Chinese EVs, if enacted, is Nov. 3. In addition, provisional duties are only realized if definitive duties follow.
“If definitive duties are lower or not applied, then provisional duties are adjusted down accordingly,” explains Reuters. “Until then, customs authorities normally just require a bank guarantee from importers.”
The EU wants to enact these tariffs due to China’s subsidization of its EVs, which threatens domestic production and sales.
Chinese EV Stocks: Mark Your Calendars for July 4
That said, the EU’s European Commission and China have already agreed to engage in negotiations to discuss the tariffs, with China hoping to put a stop to them before they become active. The two parties will meet in Brussels this week.
“The EU side has emphasised that any negotiated outcome of the investigation must be effective in addressing the injurious subsidisation,” said a European Commission spokesperson.
Both sides of the equation are at risk here. With China still reeling from recent tariffs imposed by the U.S., additional tariffs will only weaken its EV dominance.
Meanwhile, the EU is at risk because China could retaliate if the tariffs are imposed. That could mean trouble for European automakers like Mercedes Benz (OTCMKTS:MBGYY) and BMW (OTCMKTS:BMWYY).
Many European automakers have large footprints and production facilities in China. That could pose a problem if China decides to clap back with tariffs on these companies.
“This decision for additional import duties is the wrong way to go,” said BMW CEO Oliver Zipse, per The New York Times.
For now, shareholders of Chinese EV stocks will just have to wait patiently for the next update.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
