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Turkey isn’t an automotive powerhouse, but a decision it made on tariffs is rippling through the industry.

Shares of Chinese electric-vehicle makers fell early Tuesday after Turkey imposed new tariffs on imports, raising concern that the European Union will follow suit as soon as this week.

American depositary receipts for Li Auto fell about 2% in Tuesday trading, NIO and XPeng down about 6% and 4%, respectively.

The European Commission, the executive arm of the EU, is expected to announce soon whether it will lift taxes on Chinese-made EVs. Turkey said Saturday it will impose a 40% tariff. U.S. President Joe Biden increased import levies on Chinese EVs to about 100% from 25% last month.

The worry for governments in the U.S. and Europe is that cheap China’s EV exports will undercut other car makers in a way that undermines domestic development of EVs and distorts the market. China is the biggest market for EVs at the moment and some of its more successful brands are looking to expand abroad. BYD briefly overtook Tesla as the biggest EV maker last year.

Through May, BYD exported about 176,000 vehicles from China this year, up about 177% year over year. Those cars ended up in Asia, South America, Eastern Europe, and Western Europe. No Chinese-branded cars are sold in the U.S. yet.

China is now the largest new car market in the world and has a labor- cost advantage versus the West. Lower labor costs also mean parts bought from local vendors are cheaper than parts made in the U.S. and Europe.

“They have 53 million units of [car making] capacity and they have a local market of about 29 million units…that [unused] capacity difference is bigger than the entire U.S. market,” Ford Motor CEO Jim Farley recently told Barron’s. “We have to be serious about [an] even playing field.” Chinese companies have also enjoyed lower taxes and government subsidies, he says.

China’s brands have about 10% of the EV market in Europe. That amounts to about 200,000 vehicles a year. About 13 million new vehicles were sold in Europe in 2023. About two million were all electric.

About 1.2 million new cars were sold in Turkey in 2023. About 66,000 were all electric. BYD entered the Turkish market in November. Turkey has a domestic EV maker called Togg. The Togg T10X EV starts at about $44,000.