China Targets Europe’s Farmers, Not Its Automakers, in Response to EU Tariffs on Electric Cars – The Diplomat

The Chinese government is taking aim at European farmers instead of German automakers by launching an investigation into European Union pork imports, just days after the EU said it plans to impose provisional tariffs on China-made electric vehicles.

The Commerce Ministry didn’t mention the EV tariffs when it announced Monday that it is opening an anti-dumping investigation into pork from Europe, but the move is widely seen as a response to the EU move on electric cars. It also gives China a bargaining chip in any trade negotiations.

Chinese officials have said the EU investigation into subsidies for electric vehicle production in China is “typical protectionist behavior” that disregards WTO rules. The EU plans to impose provisional tariffs of 17.4 percent to 38.1 percent on EVs from China for four months starting July 4. They would apply to vehicles exported to Europe by both Chinese and foreign brands, including Tesla.

In response, China could have slapped a 25 percent duty on imports of gasoline-powered vehicles with large engines in the name of combating climate change, a step that would have hit Mercedes and BMW hard. In choosing not to do so, at least for now, the government may be acknowledging the public opposition of the German auto industry to the EU tariffs, as well as its sizeable production in China.

The Chinese market is a major one for German automakers, and the head of the country’s auto association, the VDA, described the June 12 EU tariff announcement as a further step away from global cooperation. “The risk of a global trade conflict is rising further as a result of this measure,” Hildegard Müller said in a statement.

Further complicating China’s calculations, Central and Eastern European economies are heavily dependent on Europe’s automotive industry. Any tariffs would have trickle-down impacts on countries that enjoy friendly relations with Beijing, like Hungary and Slovakia.

The investigation of EU pork imports will cover various products including fresh and frozen pork meat, intestines, and other internal organs. The announcement says it is expected to take one year, with a possible six-month extension.

Olof Gill, a spokesperson on trade for the European Commission, told journalists in Brussels that EU farm subsidies “are strictly in line with our WTO obligations” and that the commission would follow the investigation very closely and intervene as needed to ensure that the Chinese probe complies with World Trade Organization rules.

EU exports of pork products to China hit a peak at 7.4 billion euros ($7.9 billion) in 2020 when Beijing had to turn abroad to satisfy domestic demand after its pig farms were decimated by a swine disease. Since then, pork exports to China have dropped, hitting 2.5 billion euros ($2.6 billion) last year. Almost half of that total came from Spain.

“We must avoid an escalation of trade countermeasures,” said Spanish Economy Minister Carlos Cuerpo.

The Spanish pork industry association Interporc said in a statement that it would “offer complete collaboration with Chinese authorities” and provide them with any documents they required.

“The agricultural industry does not tend to be the source of conflicts, but it does end up paying the price often enough,” said Spain’s Minister for Agriculture Luis Planas, citing the United States’ imposition of tariffs on some EU farming products in 2019 during a dispute over subsidies for aircraft maker Airbus.

“I believe that we have both the time and the margin to negotiate and try to avoid this trade conflict,” Planas said.