According to China’s state-controlled Global Times, Beijing is urging the European Union to eliminate its provisional tariffs on Chinese electric vehicles before July 4. The EU plans to impose duties as high as 38.1% on imported Chinese EVs while investigating alleged excessive and unfair subsidies.
China has consistently requested the EU to retract these tariffs and has shown readiness to engage in negotiations. Beijing aims to avoid further escalation in trade tensions, particularly following previous disputes with the United States under the Trump administration. However, China emphasizes it will protect its firms vigorously if necessary.
Following discussions between EU Commissioner Valdis Dombrovskis and China’s Commerce Minister, both parties agreed to resume trade talks. Germany’s economy minister, visiting China, highlighted that avenues for dialogue are open.
Observers cited by the Global Times anticipate the best scenario would be for the EU to annul the tariff measures ahead of the July 4 deadline. Nevertheless, analysts, the European Commission, and trade groups caution that negotiations will be challenging, requiring significant concessions from China.
“Nobody will dare to do this now. Not before the elections in France,” said Alicia Garcia Herrero, senior fellow at Bruegel, an influential EU affairs think tank, on whether the planned curbs could be dropped.
“The Commission can’t change a decision it has been pondering for months on months on months,” she added. “Yes, China is putting pressure on the member states, but they would need to vote with a qualified majority against the Commission.”
The tariffs are set to be finalized on Nov. 2 at the end of the EU anti-subsidy investigation.
“The EU side emphasized that any negotiated outcome to its investigation must be effective in addressing the injurious subsidization,” a Commission spokesperson said on Monday.
The Chinese commerce ministry did not immediately respond to a Reuters request for comment.
Russwurm, who also chairs the German conglomerate and automotive supplier Thyssenkrupp, expressed concern that tariffs are the last thing Germany needs as a major exporting nation.
Meanwhile, Brussels’ decision to impose tariffs of varying degrees indicates a thorough assessment has been conducted, targeting specific issues rather than the entire Chinese automotive sector uniformly.
On the other hand, Maximilian Butek, executive director of the German Chamber of Commerce in China, emphasized that there is “no chance” the provisional tariffs will be lifted by July 4 unless China addresses all concerns raised by the European Commission.
EU trade policy has increasingly leaned towards protectionism due to concerns that China’s production-oriented economic model could lead to an influx of inexpensive goods, driven by Chinese firms boosting exports amidst sluggish domestic demand.
China has refuted allegations of unfair subsidies or claims of excessive production capacity, asserting that the development of its electric vehicle industry stems from technological advantages, market dynamics, and robust industry supply chains.
Talks are a ‘good sign’
Siegfried Russwurm, head of Germany’s biggest industry association BDI, said it was a “good sign” that both sides would hold talks in the ongoing dispute.
“You know the old saying: as long as there are talks you’re not shooting at each other,” he told German public broadcaster Deutschlandfunk.
“When European Commission President Von der Leyen announced she would investigate China’s new energy vehicles … I had an intuitive feeling it was not only an economic issue but also a geopolitical issue,” said Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges.
Trade relations between the European Union and China took a sharp downturn in May 2021 when the European Parliament halted the ratification of a significant investment treaty due to reciprocal sanctions related to human rights allegations in China’s Xinjiang region.
Tensions escalated further later that year when China downgraded diplomatic ties with Lithuania and urged multinational companies to cut ties with the Baltic nation. This action came after Lithuania allowed Taiwan, which China claims as its own territory, to establish a representative office in its capital.
While advocating for dialogue, Beijing has also signaled readiness to implement retaliatory measures if the EU does not relent, placing full responsibility for the rising tensions on Brussels.
The Global Times initially reported China’s contemplation of launching a tit-for-tat anti-dumping investigation into European pork imports, a move confirmed by the commerce ministry last week. Additionally, China is preparing an anti-subsidy probe into European dairy products and considering tariffs on large-engine gasoline cars.
Chinese authorities have hinted at these potential retaliatory steps through state media articles and interviews with industry insiders.
“It seems probable that Beijing will raise tariffs up to 25% for Europe-made cars with 2.5 or above liter engines,” said Jacob Gunter, lead analyst at Berlin-based China studies institute MERICS.
“Pork and dairy are already on the table for Beijing, and likely more agricultural products will be threatened,” he added.
“On the EU side, there are a variety of ongoing investigations … so we should expect some sort of measures targeting distortions on [Chinese] products ranging from medical devices to airport security scanners to steel pipes.”
