Author: Philip Blenkinsop

BRUSSELS (Reuters) – European Union members will face a key vote on Friday on whether to impose tariffs of up to 45% on imports of Chinese-made electric vehicles in the EU’s most critical trade matter that risks retaliation from Beijing.

The European Commission, which oversees the bloc’s trade policy, has proposed final tariffs for the next five years after a year-long anti-subsidy investigation to counter what it sees as unfair Chinese subsidies.

Under EU rules, the Commission can impose tariffs for another five years unless a qualified majority of 15 EU countries representing 65% of the EU population vote against the plan.

On Wednesday, Reuters reported that France, Greece, Italy and Poland would vote in favor of the tariffs, enough to avoid a blocking majority against the tariffs.

In the absence of a qualified majority in both cases, the EU executive can adopt tariffs. However, he could also present an amended proposal if he wanted to gain more support.

Germany, the region’s largest economy and a major automaker, will vote against tariffs, people with knowledge of the matter told Reuters on Thursday evening.

German carmakers, for whom China represents almost a third of their sales, have been particularly vocal against the tariffs. Volkswagen (ETR:) said this was a “bad approach.”

Spain’s economy minister, a previous supporter of the tariffs, also said in a letter to European Commission Vice President Valdis Dombrovskis seen by Reuters on Thursday that instead of imposing tariffs, the EU should “keep negotiations open… outside of a binding vote.” “conclude an agreement on prices and also transfer battery production to the bloc.

Spanish Prime Minister Pedro Sanchez said during his visit to China that the EU should reconsider its position.

Some EU members are nervous about Beijing’s response. In moves seen as retaliation, Beijing this year launched its own investigations into imports of EU brandy, dairy and pork products.

However, over the past five years, the EU’s position towards Beijing has hardened and now sees China as a potential partner on some issues, but also a competitor and systemic rival.

The Commission says China’s spare production capacity of 3 million electric vehicles per year that should have been exported is twice the size of the EU market. Given the 100% tariff rates in the United States and Canada, the most obvious market for these electric vehicles is Europe.

The EU’s executive has said it is willing to continue negotiations with China on an alternative to tariffs and could re-examine the price commitment – which includes a minimum import price and usually a cap on supply volumes – after previously rejecting commitments offered by Chinese companies.

One option being negotiated is minimum import prices calculated based on criteria such as the range, battery performance and length of an electric vehicle, as well as whether it is a two- or four-wheel drive vehicle, a source familiar with the matter said.

The duties range from 7.8% for Tesla (NASDAQ:) to 35.3% for SAIC and other companies deemed uncooperative in the EU investigation. These duties are in addition to the standard EU import duty of 10% on cars.