China to retaliate if Europe raises EV tariffs 

Beijing has vowed to retaliate if the European Union defies its warning and imposes additional tariffs on Chinese electric vehicles (EVs).

The EU originally set the date to announce its decision related to provisional tariffs on Chinese EVs for June 5 but it postponed the announcement to June 10, according to Reuters.

The report said the delay aims to avoid affecting the European Parliament election, which will be held on June 6-9.

Chinese Commerce Minister Wang Wentao told some Chinese enterprises in Barcelona, Spain, on June 1 that the investigations recently initiated by the EU into Chinese EVs and other products were conducted under false pretexts such as Chinese overcapacity and unfair competition.

He said these probes involved discriminatory use of trade remedies, international procurement instruments, and foreign subsidy regulations. He added that those moves had increased the risk of escalating China-EU trade frictions.

“We hope that Chinese and European companies can overcome difficulties and jointly build projects for economic and trade cooperation between China and Europe,” he said. “These projects can demonstrate deep integration of the two places’ industrial chains.”

He called on the EU to stop its “protectionism” and cooperate with China. 

His comments came after the EU received a five-page letter from the Chinese Commerce Ministry, which expressed serious concerns about the increased pace of trade investigations launched by the European Commission in recent months.

While Beijing called for a truce to avoid further escalation, it warned that the EU’s aviation and agricultural sectors could become China’s retaliation targets.

Last month, China said it might unleash tariffs as high as 25% on imported cars with large engines. If that happens, Germany will be hit by China’s countermeasures. 

On May 26, the state-owned Global Times said the Chinese government is considering starting an anti-dumping investigation into pork imports from the EU. 

Last year, China imported 2.2 million tons of pork, followed by Japan’s 1.47 million tons and Mexico’s 1.28 million tons, according to The country mainly imported pork from Spain, Brazil, the United States, Denmark and the Netherlands. 

Probes of Chinese EVs

On October 4 last year, the European Commission officially launched a 13-month investigation into whether government subsidies have helped Chinese EV makers win market share in Europe in recent years. It can impose provisional anti-subsidy duties nine months after the start of the probe. 

In a visit to Germany on May 21, US Treasury Secretary Janet Yellen called on the EU to follow in the footsteps of the US to take actions to protect itself from being hurt by China’s industrial overcapacity. 

But the EU postponed the announcement of its decision on the matter. 

“The delay of the EU’s announcement showed that China’s warning of retaliation has shown its effects,” a Henan-based columnist says in an article on May 31. 

“Although some people in the EU want to follow the US to raise tariffs on Chinese EVs, the opposition from France and Germany remains a strong resistance to the increase of tariffs,” he says.   

He says that, if the EU insists on raising tariffs on Chinese EVs, China will do the same on the EU’s wines and dairy products as well as France’s Airbus.

On May 8, top executives at BMW and Volkswagen warned against imposing EU import duties on Chinese EVs, Reuters reported. They said extra tariffs will lead to China’s retaliation and fuel protectionism in global trade. 

Currently, the EU applies a 10% levy on all imported cars, regardless of their provenance. On August 1, the US will increase its tariffs on Chinese EVs from 25% to 100%.

The Kiel Institute, a Germany-based organization for economic research, said in a report on May 31 that if the EU imposes 20% tariffs on imports of Chinese electric cars, the volume of imported Chinese EVs will fall by 25%, or 125,000 units worth US$3.8 billion. 

It said such a decline in imports of Chinese EVs could push up the prices of local electric cars in Europe due to higher local production costs. However, it added that Chinese EV makers such as BYD would then build new European plants to meet local demand. 

Meanwhile, Nikkei Asia reported on June 1 that Great Wall Motor is going to close its European headquarters in Munich on August 1 and dismiss all 100 employees there. It said the company was disappointed by its EV sales in Germany. 

Industrial overcapacity

Apart from the investigations of Chinese EVs, the EU has also in recent months looked into China’s railway locomotives as well as equipment used for photovoltaics, wind power generation, security inspections and medical devices.

On May 6, Chinese President Xi Jinping told French President Emmanuel Macron and European Commission President Ursula von der Leyen at a China-France-EU trilateral meeting in Paris that there is no such thing as “China’s overcapacity problem.”

“While reaffirming our interest in a balanced and reciprocal collaboration, we express concerns about China’s comprehensive use of non-market policies and practices that undermines our workers, industries, and economic resilience,” G7 finance ministers and central bank governors said in a joint statement on May 25.

Read: Firm offices raided, China calls EU ‘protectionist’

Follow Jeff Pao on Twitter: @jeffpao3

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