China is urging the European Union to cancel its preliminary tariffs on Chinese electric vehicles (EVs) by July 4, following an agreement to hold new trade talks. The EU has proposed provisional duties of up to 38.1% on imported Chinese-made EVs as it investigates claims of excessive subsidies to Chinese EV manufacturers. Beijing, wary of another tariff war reminiscent of the U.S. tariffs imposed during the Trump administration, is open to negotiation but has indicated it will take all necessary measures to protect its firms if required.
The call for renewed discussions comes after a conversation between EU Commissioner Valdis Dombrovskis and Chinese Commerce Minister Wang Wentao. The dialogue coincided with a visit to China by Germany’s economy minister, who noted that opportunities for discussion remain open. Observers suggest that the best possible outcome of these talks would be for the EU to revoke its tariff decision before the July 4 deadline.
The EU’s increasingly protectionist stance has prompted warnings from China that retaliatory measures could ensue, potentially leading to detrimental “lose-lose” outcomes for both parties. The final decision on these tariffs is set for November 2, following the conclusion of the EU’s anti-subsidy investigation. European trade policy has shifted towards greater protectionism, driven by concerns that China’s production-focused model could flood the market with cheap goods as Chinese firms seek to boost exports amid weak domestic demand.
China has consistently denied allegations of unfair subsidies or overcapacity issues, arguing that its EV industry’s success is due to technological advancements, market dynamics, and robust supply chains. Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges, noted that the investigation into China’s new energy vehicles is not solely an economic issue but also a geopolitical one.
Trade relations between the EU and China have been strained since the European Parliament voted in May 2021 to freeze the ratification of a significant investment treaty over mutual sanctions related to human rights abuses in China’s Xinjiang region. Further tensions arose when China downgraded diplomatic ties with Lithuania after Vilnius invited Taiwan to open a representative office.
While Beijing advocates for dialogue, it has also hinted at possible retaliatory measures should the EU proceed with its tariffs. The Global Times reported that China is considering an anti-dumping investigation into European pork imports and has hinted at similar investigations into European dairy products and large-engined petrol cars. Jacob Gunter, lead analyst at the Berlin-based MERICS institute, noted that Beijing might raise tariffs up to 25% on Europe-made cars with engines of 2.5 liters or more, and additional agricultural products could also be targeted.
On the EU side, ongoing investigations are likely to result in measures addressing distortions in Chinese products, ranging from medical devices to steel pipes. The unfolding trade dispute highlights the complexities and challenges in Sino-European trade relations, emphasizing the need for careful negotiation to avoid further escalation.
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