Home China China wants EU to Scrap tariffs on EVs by July 4 as...

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

German Economy Minister Robert Habeck
German Economic Affairs Minister Robert Habeck at a Press conference in Shanghai

Beijing wants the EU to toss out its preliminary tariffs on Chinese electric vehicles by July 4, China’s state-controlled Global Times reported, after both sides agreed to hold fresh trade talks.

Provisional European Union duties of up to 38.1% on imported Chinese-made EVs are set to apply by July 4 while the bloc is looking into what it says are excessive and unfair subsidies.

While the EU said Chinese EVs were unfairly subsidised by its government, China has accused the EU of protectionism and trade rule breaches.

While repeatedly urging the EU to cancel its tariffs, China has said that it is willing to negotiate. Beijing does not want to be embroiled in another tariff war, still stung by U.S. tariffs on its goods imposed by the Trump administration. It is determined to take all steps to protect Chinese firms.

In mid May, U.S. President Joe Biden said that the U.S. is stepping up tariffs on Chinese made electric cars, solar panels, steel and other goods.

Biden said that he would not let China “ unfairly control the market’’ for electric vehicles and other key goods, including batteries, computer chips and basic medical supplies.

Despite frictions, EU and China have agreed to restart talks following a call between EU Commissioner Valdis Dombrovskis and China’s Commerce Minister on Saturday. This happened during a visit to China by Germany’s Economy minister, Robert Habeck.

“What I suggested to my Chinese partners today is that the doors are open for discussions and I hope that this message was heard,” Habeck said in his first statement in Shanghai, after meetings with Chinese officials in Beijing.

Habeck’s visit is the first by a senior European official after Brussels proposed hefty duties on imports of Chinese-made electric vehicles (EVs) to combat what the EU considers excessive subsidies.

China’s Global Times, citing observers, said the best outcome is that the EU scraps its tariff decision before July 4.

But the Commission, analysts and European trade lobby groups emphasized that talks would be a major undertaking and China would need to come willing to make major concessions.

“Nobody will dare to do this now. Not before the elections in France,” said Alicia Garcia Herrero, senior fellow at Bruegel, an influential EU affairs think tank, on whether the planned curbs could be dropped.

“The Commission can’t change a decision it has been pondering for months on months on months,” she added. “Yes, China is putting pressure on the member states, but they would need to vote with a qualified majority against the Commission.”

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

Nitin A Gokhale WhatsApp Channel

Siegfried Russwurm, head of Germany’s biggest industry association BDI, said it was a “good sign” that both sides would hold talks in the ongoing dispute.

Russwurm, who also serves as chairman for German conglomerate and car supplier Thyssenkrupp TKAG.DE, said tariffs was the last thing Germany needed as a major exporting nation.

At the same time, Brussels’ move to apply tariffs of varying degrees suggested a thorough analysis has taken place and that this was not an effort that targets the entire Chinese car sector in equal measure.

Maximilian Butek, Executive Director at the German Chamber of Commerce in China said there was “zero chance” that the preliminary tariffs would be removed by July 4 unless China eliminated all the issues flagged by the European Commission.

EU trade policy has turned increasingly protective over concerns that China’s production-focused development model could see it 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 Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges.

Trade ties between the 27-strong bloc and the world’s No. 2 economy took an abrupt turn for the worse in May 2021 when the European Parliament voted 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.

The same year, they came to blows again when China downgraded diplomatic ties with Lithuania and told multinationals to sever ties with the Baltic state. The provocation for this was Vilnius inviting democratically governed Taiwan, which China claims as part of its territory, to open a representative office in the capital.

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

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% for Europe-made cars with 2.5 or above litre engines,” said Jacob Gunter, lead analyst at Berlin-based China studies institute MERICS.

(With Inputs from Reuters)