Shock To The System (I): Can the EU fend off the threat of Chinese electric cars?
Jun 24, 2024
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The podcast discusses the EU imposing tariffs on Chinese electric cars, sparking retaliatory investigations from China. Chinese EVs are rapidly gaining competitiveness in the EU market. The episode explores the impacts of tariffs, the EU's anti-subsidy investigation, China's retaliatory measures, and the broader implications on EU-China relations.
China retaliates with anti-dumping probes, highlighting global trade relationships and diplomatic considerations.
Deep dives
EU Implements Tariffs on Chinese Electric Cars
The European Commission has announced tariffs up to 38% on electric cars from China due to subsidies found in the supply chain, leading to escalating trade tensions with China. The probe involved three Chinese companies - BYD, Xi Li, and Psyc - where each received individual import duties based on subsidy levels, impacting other electric vehicle exports. This move symbolizes broader EU concerns about China's economic practices and aims to level the playing field for international businesses.
Implications of the Tariffs on European and Chinese Manufacturers
While European manufacturers are subject to these tariffs, even those producing electric cars in China, Chinese companies like BYD gain a competitive edge due to lower import duties. The EU's aim may be to stimulate manufacturing in Europe and incentivize European companies to bring production back. This move signifies a strategic shift towards fostering local manufacturing amidst fierce competition from dominant Chinese electric car brands.
German Concerns and Varied Responses within the Government
Germany, particularly influential in EU-China trade dynamics, displays internal divisions on supporting the tariffs. While Chancellor Olaf Schulz opposes them, key ministers like Robert Habach and Anna-Lina Berbach are more favorable. The German car industry's apprehensions of facing Chinese retaliation, especially in the context of broader EU-China trade tensions, highlight the complex socio-political and economic considerations at play within the country.
Potential for Chinese Retaliation and Diplomatic Ramifications
China has retaliated against the EU's actions by launching anti-dumping probes into products like French cognac and EU pork, impacting agricultural and automotive exports. The threat of further Chinese actions, leveraging economic measures against EU member states, underscores the intricate web of global trade relationships and the role of diplomatic considerations in trade disputes. The EU's stance on enforcing rules and seeking compliance with global trade norms contrasts with the US's aggressive tariff tactics, shaping the evolving dynamics of EU-China trade relations.
The Role of Political Context and Decarbonization Goals
The broader geopolitical context, including China's backing of Russia in the Ukraine conflict, has exacerbated EU-China trade tensions. The EU's balancing act between decarbonization goals, protecting local industries, and promoting affordable electric vehicles highlights the complex trade-offs involved in shaping trade policies. The episode sheds light on how political alignments, economic priorities, and environmental imperatives intertwine to influence international trade dynamics and diplomatic choices.
Negotiation Prospects and Implications for the UK
Amidst rising trade tensions, negotiations between China and the EU over tariffs signal potential progress towards resolving the trade dispute. The UK's role as a potential re-export hub for Chinese electric vehicles, driven by the absence of additional tariffs in the UK-EU deal, poses strategic considerations for aligning with EU trade policies. The evolving landscape underscores the interplay between economic interests, regulatory frameworks, and global trade dynamics, shaping the intricate diplomatic and economic relationships between key players.
Latest Developments and Future Pathways
Recent developments involving talks between China and the EU and Germany's Vice Chancellor's visit suggest potential avenues for de-escalating trade tensions. The Ministry of Commerce's readiness to engage in discussions underscores the strategic impact of tariff threats in influencing diplomatic engagements. The ongoing narrative of negotiations and retaliatory measures underscores the complexities and implications of trade disputes on international relations and economic strategies.
The EU and China are in the foothills of a trade war. After a seven month investigation, the European Commission has announced tariffs of up to 38 per cent on electric cars from China, citing that they’ve found ‘subsidies in every part of the supply chain’. In retaliation, China has ramped up its own investigations into imports from the EU.
This, of course, comes after the US has announced its own 100 per cent tariff on Chinese electric cars.
Listeners will know that Chinese electric cars are becoming ever more competitive. In just three years, the value of the EU’s imports of Chinese EVs have surged tenfold – from $1.6 billion in 2020 to $11.5 billion last year. The Commission has warned that Chinese electric cars could make up 15 per cent of the EU market by next year.
What are the ramifications of these new tariffs? Is there anything that will reverse this new tide of protectionism? On this episode, I’m talking to Finbarr Bermingham, Europe correspondent at the South China Morning Post, who patches in from Brussels.
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