The European Union said on Wednesday it would impose additional tariffs of up to 38% on electric vehicles exported from China to EU countries, which EU leaders said was aimed at protecting the region’s manufacturers from unfair competition.

A month ago, President Biden quadrupled U.S. tariffs on Chinese electric vehicles to 100%. The EU move opens another front in escalating trade tensions with China amid growing concerns about Chinese green tech products flooding global markets.

The EU and U.S. actions also reflect the challenges facing traditional European and American automakers from emerging Chinese companies that are focused on electric vehicles and have a much lower cost base than Western rivals.

But unlike U.S. automakers, several European automakers have close ties to the Chinese market and will also be subject to higher tariffs on cars they produce in China. They have criticized the EU’s move to increase tariffs from 10%, fearing it would trigger retaliation from China, as well as higher prices and lower demand for battery-powered vehicles across the market.

The tariffs announced Wednesday are an initial increase on top of existing 10% tariffs and will take effect July 4. The tariffs range from 17.4% to 38.1% on three leading Chinese manufacturers, BYD, Geely and SAIC. The tariffs are calculated based on the level of coordination with European officials, who have been investigating the extent of Chinese government support for the companies for the past few months.

The EU said other automakers that make electric cars in China, including European companies with factories or joint ventures in China, would face tariffs of 21% or 38.1%. Those rates also depend on how well they cooperate with the investigation.

The European Union defended the action in a statement, saying an investigation opened on Oct. 4 found that China’s electric vehicle supply chain “benefits significantly from unfair Chinese subsidies, as a result of which the influx of subsidized Chinese imports at artificially low prices poses a clear, foreseeable and imminent threat of damage to EU industry.”

He Yadong, a spokesman for China’s Ministry of Commerce, said China’s condemnation of the tariffs lacked “factual and legal basis” and amounted to “weaponizing economic and trade issues.”

“This is inconsistent with the consensus reached by Chinese and European leaders on strengthening cooperation, and will also affect the atmosphere of China-EU bilateral economic and trade cooperation,” he said.

The investigation is being conducted by the European Commission, the EU’s executive arm, to determine whether the Chinese government effectively subsidizes the country’s production of electric vehicles and exports those cars to Europe at lower prices than European competitors.

The European Union is the world’s second-largest electric vehicle market after China, with the auto industry providing nearly 13 million jobs in the 27-nation bloc. Last year, electric vehicle imports from China were worth $11.5 billion, compared with just $1.6 billion in 2020.

About 37% of all electric cars imported into Europe come from China, including Tesla, BMW and Renault-owned Dacia. Chinese brands account for 19% of the European electric car market, and their numbers have been growing steadily, according to a study by Rhodium Group.

Europe is willing to engage with Chinese officials to resolve the dispute, according to senior EU communications officials, who insist the bloc is not raising tariffs for the sake of raising tariffs but to protect its domestic industry.

Tesla, which makes its Model 3 and Model Y in Shanghai for the European market, applied to have tariffs calculated separately for its cars, EU officials said. Other companies seeking separate reviews have nine months to submit their applications, but none had as of Wednesday’s announcement.

European Commission President Ursula von der Leyen said last month that Europe was taking a “tailored approach” to calculate the tariff increase on top of the existing 10% that would be “proportionate to the level of damage” caused. Tariffs on other exporting companies would be based on a weighted average of tariffs imposed on the three companies under investigation.

Wednesday’s EU announcement came after China warned it could retaliate by raising tariffs on European imports of gas-powered vehicles, agricultural products and aviation products. China already imposes a 15% tariff on all electric vehicles imported from Europe.

This includes cars made by companies such as BMW and Volkswagen, which not only sell cars to China but also have large production facilities in China.

German automakers worry that tariffs will push up prices in Europe and provoke retaliation from China, ultimately hurting their interests in both markets. German Chancellor Olaf Scholz criticized the increased tariffs last week during a visit to a plant in Ruesselsheim owned by Stellant’s Opel AG.

“Isolated and illegal tariff barriers only end up making everything more expensive and everyone poorer,” Scholz said. “We will not close our market to foreign companies because we do not want our companies to be treated that way.”

Economic experts have warned that raising tariffs to 20 percent could disrupt trade routes. According to calculations by the Kiel Institute for the World Economy, such a tax increase would prevent $3.8 billion worth of Chinese electric vehicles from entering Europe.

But other experts point out that Chinese manufacturers have a cost advantage over traditional European carmakers in producing components such as electronic modules and batteries, meaning Europe would need to impose tariffs of at least 50% to have an effect.

Even if European carmakers are able to fill the gap, the reduction in the number of Chinese models will push up the overall price of electric vehicles due to their higher labor and production costs, the Kiel Institute for the World Economy said.

“It’s by no means a sure thing that European carmakers will fill the gap,” said Julian Hinz, a trade researcher at the institute. He said another threat to European producers is that Chinese manufacturers are already planning to expand production in Europe.

BYD, a leading Chinese automaker, has set its sights on becoming Europe’s top electric car maker by 2030. Late last year, BYD announced plans to build its first assembly plant in the European Union in Hungary. The company said it was considering building a second plant elsewhere in Europe.

Another Chinese manufacturer, Chery, announced last month it would open a factory near Barcelona as part of a joint venture with Spanish electric car company EV Motors.

Other European countries are also eager for the arrival of Chinese automakers, arguing it will create jobs and strengthen domestic supply chains.

French President Emmanuel Macron has made active efforts to attract more battery manufacturers, including Chinese companies, to northern France, where factory jobs have been declining. French Finance Minister Bruno Le Maire even went a step further, saying that “France very much welcomes” the Chinese auto industry.

Given the possibility of Chinese companies expanding in their backyards, many European automakers have noted that they are more concerned about improving competitiveness than tariffs.

Volkswagen, which has several production and research sites in China, said it was concerned about the tariffs and saw them as having a disruptive impact, especially at a time when demand for electric vehicles is falling in Europe.

“An increase in EU import duties could trigger a series of extremely damaging measures and countermeasures, leading to an escalation of the trade conflict,” Volkswagen wrote in a statement on Wednesday. “We believe that the negative effects of this decision will outweigh any positive impacts.”

The tariffs are expected to take effect early next month. Affected companies and the Chinese government will have several days to make their case. The committee will implement the final tariffs by November for a five-year period.