The effectiveness of the European Union's tariffs on Chinese automakers may be limited.

The European Union will make a final decision on the largest EU trade case against China in over a decade by the end of October.

Automakers and countries are divided over whether to impose tariffs on Chinese electric vehicles, with some countries imposing tariffs of up to 36.3%. A German automotive trade association argues that these tariffs would harm German automakers, which have a significant presence in China. Germany has a substantial automotive trade surplus with the country, while Italian and French automakers have almost no presence there.

Imposing tariffs on China's car exports is justified by both proponents of tariffs and trade and industry analysts, who argue that this support for domestic manufacturers is necessary.

The Chinese economy operates under a state-controlled credit system and the government selects sectors to promote, according to William Reinsch, senior advisor and Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

"If you do that in that kind of economy, you will always have overinvestment, overcapacity, and overproduction, which will ultimately result in the dumping of excess production on the rest of the world."

While European automakers require around $20,000 to produce a car, Chinese automakers can do it for approximately $5,500, according to Felipe Muñoz, senior analyst for JATO Dynamics.

That tremendous cost advantage is partially explained by government subsidies, he said.

""Unlike the rest of the world, China has already secured the supply chain for electric car batteries due to lower labor costs and economies of scale," Muñoz explained."

Watch the video to learn more