China wants EU tariffs on EVs gone by July 4 as talks resume

BEIJING - Beijing wants the EU to scrap plans to impose preliminary tariffs on Chinese electric vehicle (EV) imports by July 4, China’s state-controlled Global Times reported, after both sides agreed to negotiate a possible compromise.

Provisional EU

duties of up to 38.1 per cent on imported Chinese-made EVs

are set to kick in by July 4 while the bloc investigates what it claims are excessive and unfair subsidies to Chinese EV makers.

The European Commission said it would host technical talks with Chinese officials in Brussels this week. A spokesperson said: “The EU side has emphasised that any negotiated outcome of the investigation must be effective in addressing the injurious subsidisation.”

German Chancellor Olaf Scholz said there needed to be “serious movement and progress” from China too.

China has repeatedly called on the EU to cancel its tariffs, expressing a willingness to negotiate. Beijing does not want to be embroiled in another tariff war, still stung by US tariffs on its goods imposed by the Trump administration, but says it would take all steps to protect Chinese firms should one happen.

Both sides agreed to restart tariff talks after a call between EU Commissioner Valdis Dombrovskis and Chinese Commerce Minister Wang Wentao on June 22 during a visit to China by Germany’s economy minister, who said the doors for discussion are “open”.

The talks’ best outcome is that the EU scraps its tariff decision before July 4, Global Times reported late on June 23, citing observers.

The EU’s increasingly protectionist moves would trigger countermeasures from China, and an escalation in trade frictions would only lead to “lose-lose” results for both sides, the newspaper said.

The tariffs are set to be finalised on Nov 2 at the end of the EU anti-subsidy investigation.

The Chinese Commerce Ministry did not immediately respond to a Reuters request for comment.

Trade war?

EU trade policy has turned more protective over concerns China’s production-focused development model could see the bloc flooded with cheap goods as Chinese firms look to step up exports amid weak domestic demand.

China has rejected accusations of unfair subsidies or that it has an overcapacity problem, saying the development of its EV industry has been the result of advantages in technology, market and industry supply chains.

“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 Dr Zhang Yansheng, chief research fellow at the China Centre for International Economic Exchanges.

“Personally, I think it is unfair to start a tariff war by only taking into consideration the capacity utilisation rate and insufficient demand,” he added.

Trade relations between the 27-strong bloc and the world’s No. 2 economy took an abrupt turn for the worse when the European Parliament voted in May 2021 to freeze ratification of what would have been a landmark investment treaty because of tit-for-tat sanctions over allegations of human rights abuses in China’s Xinjiang region.

Beijing and Brussels came to blows again that year when China downgraded diplomatic ties with Lithuania and told multinationals to sever relations with the Baltic state after Vilnius invited democratically governed Taiwan, which China claims as part of its territory, to open a representative office in the capital.

Armed and ready

Although Beijing is calling for talks, it has also indicated that it has retaliatory measures ready if the commission does not back down, and that it considers Brussels wholly responsible for the escalating tensions.

The Global Times, which first reported that China was considering a tit-for-tat anti-dumping probe into European pork imports – which the Commerce Ministry announced last week it would undertake – has also teed up an anti-subsidy investigation into European dairy goods and tariffs on large-engine petrol cars.

The Chinese authorities have dropped hints about possible retaliatory measures through state media commentaries and interviews with industry figures.

“It seems probable that Beijing will raise tariffs up to 25 per cent for Europe-made cars with 2.5-or-above-litre engines,” said lead analyst Jacob Gunter at Merics, a Berlin-based China studies institute. “Pork and dairy are already on the table for Beijing, and likely more agricultural products will be threatened.”

“On the EU side, there are a variety of ongoing investigations using the new toolkit that Brussels has assembled, so we should expect some sort of measures targeting distortions on (Chinese) products ranging from medical devices to airport security scanners to steel pipes.” REUTERS