China has vowed to retaliate if the European Union ignores warnings and imposes new tariffs on Chinese-made electric vehicles (EVs), which currently face a 10% tariff on all imported cars.
According to Reuters, the EU had originally set June 5 as the date for announcing its decision on temporary tariffs on Chinese-made EVs, but has now postponed the announcement to June 10.
The postponement is reportedly intended to avoid disrupting the European Parliament elections, which take place from 6-9 June.
China’s Minister of Commerce, Wang Wentao, told several Chinese companies in Barcelona, Spain, on June 1 that the EU’s recently launched investigations into Chinese electric vehicles and other products were launched under false pretenses such as Chinese overcapacity and unfair competition.
These investigations include discriminatory use of trade remedies, international procurement measures and foreign subsidy regulations, he said, adding that these moves increased the risk of escalating trade tensions between China and the EU.
“We hope that Chinese and European enterprises can overcome difficulties and jointly build projects for China-Europe economic and trade cooperation,” he said. “These projects can demonstrate the deep integration of the industrial chains of the two regions.”
He called on the EU to abandon “protectionism” and cooperate with China.
His comments came after the EU received a five-page letter from China’s Ministry of Commerce expressing serious concerns about the accelerating pace of trade investigations launched by the European Commission in recent months.
China called for a ceasefire to avoid further escalation, but warned that the EU’s aviation and agriculture sectors could become targets of Chinese retaliation.
China said last month it could impose tariffs of up to 25% on imported cars with large engines, leaving Germany vulnerable to Chinese retaliatory measures.
On May 26, state media Global Times reported that the Chinese government was considering launching an anti-dumping investigation into pork imports from the EU.
Last year, China imported 2.2 million tonnes of pork, followed by Japan with 1.47 million tonnes and Mexico with 1.28 million tonnes, according to Statista.com. China mainly imports pork from Spain, Brazil, the United States, Denmark and the Netherlands.
Survey of Chinese-made EVs
The European Commission formally launched a 13-month investigation on October 4 last year into whether government subsidies helped Chinese EV makers expand their market share in Europe in recent years, and can impose provisional anti-subsidy tariffs nine months after the investigation begins.
U.S. Treasury Secretary Janet Yellen, visiting Germany on May 21, called on the EU to follow the U.S. lead and take action to protect itself from the damage caused by China’s over-industrialization.
However, the EU has postponed announcing a decision on the matter.
“The EU’s delay in making the announcement suggests that China’s warnings of retaliation have had an effect,” a Henan columnist wrote in a May 31 article.
“Some in the EU want to follow the US lead and raise tariffs on Chinese-made EVs, but French and German opposition to raising tariffs remains strong,” he said.
He said if the EU insisted on raising tariffs on Chinese-made EVs, China would do the same on EU wine and dairy products, as well as French Airbus.
Reuters reported on May 8 that executives from BMW and Volkswagen have warned that they will oppose EU import tariffs on Chinese-made electric vehicles, saying the additional tariffs would lead to Chinese retaliation and fuel protectionism in global trade.
Currently, the EU imposes a 10% tariff on all imported cars, regardless of origin, and on August 1, the US is set to increase tariffs on Chinese-made EVs from 25% to 100%.
The Kiel Institute, a Germany-based economic research institute, said in a report on May 31 that if the EU imposed a 20% tariff on imports of Chinese-made electric vehicles, imports of Chinese-made electric vehicles would fall by 25%, or 125,000 units, worth $3.8 billion.
The company said reduced imports of Chinese-made EVs could lead to higher prices for locally made EVs in Europe due to higher local production costs, but added that Chinese EV makers such as BYD would build new factories in Europe to meet local demand.
Meanwhile, Nikkei Asia reported on June 1 that Great Wall Motors plans to close its European headquarters in Munich on August 1 and lay off all 100 employees, citing disappointment in EV sales in Germany.
Industrial overcapacity
As well as investigating Chinese-made EVs, the EU has also been investigating in recent months Chinese equipment used in rail locomotives, solar and wind power plants, security screening and medical devices.
On May 6, at a trilateral meeting between China, France and the EU in Paris, Chinese President Xi Jinping told French President Macron and European Commission President von der Leyen that there is no such thing as “China’s excess production capacity problem.”
“While we reaffirm our interest in balanced mutual cooperation, we express concern at China’s full use of non-market policies and practices that undermine the resilience of workers, industries and the economy,” the G7 finance ministers and central bank governors said in a joint statement on May 25.
Company offices raided, China accuses EU of being ‘protectionist’
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