China To Hit Europe Back After New EV Tariffs
The Chinese government might slap tit-for-tat trade barriers in retaliation for EU tariffs on EVs.
Jun 14, 2024 at 1:00pm ET
Chinese companies are urging the government to slap retaliatory measures on European goods after the bloc imposed up to 38% tariffs on China’s electric vehicle imports early this week.
Trade tensions between two of the world’s major trading partners have been soaring as China’s EVs are flooding European markets, threatening to uproot domestic players with high-quality and low-cost alternatives. China argues that its EVs are simply superior products and that the tariffs are unfair. As a result, Europe and China are now exchanging trade blows.
Trade war between China and the West.
After the U.S. slapped 100% tariffs on Chinese vehicle imports last month, the European Union followed with its own set of tariffs of up to 38% this week. Far lower than the U.S., but still damaging for an industry operating on slim margins. China, home to the world’s largest car market, isn’t sitting quietly.
China’s state-owned newspaper, Global Times, reported yesterday that Chinese companies will file an application with authorities to launch an “anti-dumping probe” into certain EU pork and dairy products. Reuters said, citing data from the European Commission’s Directorate-General for Agriculture and Rural Development, that the EU exports dairy products worth $1.8 billion to China annually.
Cars would also be impacted as China is considering hiking tariffs on vehicle imports from the current 15% to 25%. German automakers like Mercedes-Benz, BMW, and Volkswagen would bear the brunt of these tariffs when they go into effect as China is by far the largest market in terms of unit sales.
These automakers have deeply invested in China. Certain German models, like the BMW iX3, are exclusively manufactured in China and exported to other countries. Many German automakers have JVs with local players for their Chinese operations. However, several models are imported from Europe, like the Mercedes EQS and EQS SUV, whose prices would soar after retaliatory tariffs.
This comes in addition to similar anti-dumping investigations into European goods announced early this year. Chinese authorities are scrutinizing Brandy and certain plastics that enter China from the U.S., Europe, Japan, and Taiwan. Given the government’s iron grip over its agencies, it would be difficult to decipher whether these are independent investigations or orchestrated.
Despite opposition from individual member countries and its own automakers, the EU slapped tariffs of up to 38% on Chinese EV imports this week. In an age of thin profit margins, these tariffs would make matters challenging for Chinese manufacturers, many of whom are parent companies of European brands. Geely Group owns Swedish automakers Volvo and Polestar, whereas MG Motors of the U.K. is owned by China’s SAIC.
After the EU slapped the new tariffs, a Chinese auto industry group representing local carmakers said this week that they’re not discouraged from continuing to invest in Europe with local plants. Many European countries are enticing Chinese carmakers with subsidies to establish manufacturing to boost local economies and add thousands of jobs.
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