Quote from Alex bobby on June 25, 2024, 4:24 AM

China Urges EU to Scrap Tariffs on Electric Vehicles Ahead of New Trade Talks

China is pressing the European Union (EU) to withdraw its preliminary tariffs on Chinese electric vehicles (EVs) before they take effect on July 4, as reported by China's state-controlled Global Times. This development follows both sides agreeing to initiate fresh trade discussions.

The EU's provisional duties, which could reach up to 38.1% on imported Chinese-made EVs, are set to commence while the bloc investigates what it claims are excessive and unfair subsidies provided by China to its EV industry.

The Call for Negotiation

China has been vocal in its request for the EU to cancel these tariffs and has expressed a readiness to engage in negotiations. Beijing is keen to avoid another tariff war, still feeling the impact of the tariffs imposed by the Trump administration on Chinese goods. Nonetheless, China has indicated it will take all necessary measures to protect its firms if a tariff war ensues.

The agreement to restart trade talks came after a conversation between EU Commissioner Valdis Dombrovskis and China's Commerce Minister. This discussion coincided with a visit to China by Germany's economy minister, who emphasized that opportunities for dialogue remain open.

The Global Times, referencing observers, suggested that the best outcome would be for the EU to abandon its tariff decision before the July 4 deadline. However, analysts and European trade lobby groups have emphasized that these talks will be complex, and significant concessions from China will be necessary.

EU's Stance and Challenges

Alicia Garcia Herrero, a senior fellow at the influential EU affairs think tank Bruegel, noted the unlikelihood of the EU dropping the planned curbs, particularly before the French elections. She emphasized that the European Commission has deliberated on this decision for an extended period and would require a qualified majority from member states to overturn it.

The EU anti-subsidy investigation is set to conclude on November 2, at which point the tariffs could be finalized. A spokesperson from the Commission stressed that any negotiated resolution must effectively address the subsidization that harms the EU's market.

Industry Reactions

The ongoing talks have been viewed positively by industry leaders. Siegfried Russwurm, head of Germany's largest industry association BDI, described the talks as a "good sign," highlighting the importance of dialogue over conflict. He noted that tariffs would be detrimental to Germany, a major exporting nation.

Maximilian Butek, executive director at the German Chamber of Commerce in China, expressed skepticism about the preliminary tariffs being lifted by July 4, unless China addresses all issues highlighted by the European Commission.

Broader Trade Relations

The EU's trade policy has become increasingly protective due to concerns that China's production-focused development model could flood the market with cheap goods. This protective stance has grown as Chinese firms ramp up exports amid weak domestic demand. China has denied allegations of unfair subsidies and overcapacity, asserting that its EV industry's growth stems from technological, market, and supply chain advantages.

Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges, indicated that the investigation into Chinese new energy vehicles is as much a geopolitical issue as an economic one.

Historical Context and Future Actions

Trade relations between the EU and China deteriorated significantly in May 2021 when the European Parliament froze the ratification of a landmark investment treaty due to tit-for-tat sanctions over alleged human rights abuses in China's Xinjiang region. Tensions escalated further when China downgraded diplomatic ties with Lithuania over its relationship with Taiwan.

Despite advocating for talks, Beijing has suggested it has retaliatory measures ready if the EU does not retract the tariffs. Reports from the Global Times indicate China might launch an anti-dumping investigation into European pork imports and anti-subsidy probes into European dairy products and large engine petrol cars.

Jacob Gunter, lead analyst at the Berlin-based China studies institute MERICS, predicted potential Chinese tariffs of up to 25% on Europe-made cars with engines of 2.5 liters or more. He also noted that agricultural products like pork and dairy could be targeted.

On the EU's side, ongoing investigations into various Chinese products suggest potential measures against distortions in markets ranging from medical devices to airport security scanners to steel pipes.

The outcome of these negotiations will be pivotal in shaping the future of EU-China trade relations and the global EV market.