The crucial moment is approaching, Beijing has not really "pulled the trigger"

Despite recent constructive talks between the European Union (EU) and China, the impasse over the 27-member bloc’s plans to impose tariffs on Beijing-made electric vehicles remains unresolved. Tensions are likely to continue to escalate.

China will 'definitely persevere until the last minute' to fight over EU tariffs. (Source: Global Times)

In July, the 27-member bloc announced plans to impose import duties of up to 36% on certain electric vehicles (EVs) imported from China. To reconcile, on September 19, Chinese Commerce Minister Wang Wentao and European Commission (EC) Vice President and European Union (EU) Trade Commissioner Valdis Dombrovskis met in Brussels (Belgium) to discuss the issue.

Following an anti-subsidy investigation initiated by Brussels last year, the EC said China's large state subsidies create an unfair advantage for its carmakers and violate the principle of a level playing field for all competitors in the electric vehicle market.

However, the world's second largest economy has rejected the EU's investigation results. Mr. Wang Wentao said that China "will definitely persevere until the last minute" to fight this tariff issue.

After the meeting, Mr. Dombrovskis posted on X that both sides agreed to “find an effective, enforceable and World Trade Organization (WTO) compatible solution” to the conflict.

Are the two sides compromising?

Several news agencies have revealed that the EU may be ready to cut tariffs on electric vehicles imported from China and other countries into the bloc.

Citing a source familiar with the talks, Reuters reported that Tesla's proposed tariff rate could be reduced from 9% to 7.8%. Geely's tariff rate is said to be reduced from 19.3% to 18.8%.

Meanwhile, the highest tariff rate of 35.3% will apply to SAIC Motor and other companies that do not cooperate with the EU investigation.

But Mr. Vuong Van Dao said the tariffs were still too high. He left Brussels with a promise from the 27-member bloc that the two sides had agreed to review their commitments on electric vehicle prices.

Before meeting with EU officials, China's commerce minister visited Berlin and Rome, where Beijing is trying to influence government positions in the two car-producing countries.

China threatens retaliation

Since the EU began investigating the pricing policies of Chinese carmakers, Beijing has threatened to retaliate with these higher tariffs.

The world's second-largest economy has said it will impose higher tariffs on some EU products and warned of major consequences for bilateral trade.

Noah Barkin, a senior adviser at Rhodium Group, believes Beijing will “redouble its efforts” to sway the vote among EU member states, which is expected to take place this week.

Meanwhile, the Chinese government has launched an anti-subsidy investigation into European imports of pork, spirits and dairy products — a move seen as particularly punitive against France for its strong pro-tariff stance.

Beijing's dairy industry has also asked the government to consider exporting European cheese, cream and milk.

The country of one billion people believes that subsidies from the 27-member bloc give European farmers an unfair advantage in the Chinese market, harming the domestic dairy industry.

According to the EU statistics agency - Eurostat - China is the 8th largest market for EU dairy exports. Meanwhile, Italy, the Netherlands, Denmark and France are the EU's largest dairy exporters to the world's second largest economy.

Commenting on China's retaliatory tariffs, Italian Foreign Minister Antonio Tajani said his government still "supports the EU's position" on tariffs on electric vehicles.

China is hoping to get support from the EU's largest trading partner, Germany. (Source: AFP)

Spain, on the other hand, appeared more worried.

"Spain is concerned that the pork tax will harm the country's industry," said Gregor Sebastian, another economist at Rhodium Group.

And indeed, Spanish Prime Minister Pedro Sanchez said during a recent visit to Beijing that he would urge the EC to “reconsider” tariffs on Chinese electric cars.

Now, President Xi Jinping's country is hoping to get support from the EU's largest trading partner, Germany.

German Chancellor Olaf Scholz said his government has no intention of “closing the market to foreign companies,” which is why Germany abstained in a vote on Chinese electric vehicle tariffs this summer.

German carmakers such as BMW, Mercedes and Volkswagen are also concerned that their electric cars made in China will be subject to higher EU import tariffs, which would make them more expensive in Europe.

Moreover, escalating tensions could affect the sales of the aforementioned carmakers in China - the largest foreign market for German cars.

The big moment is coming

Germany’s opposition to tariffs on Chinese electric vehicles has prompted other capitals to follow suit, says Noah Barkin. Spain appears to have reversed its stance, but France, Italy, Poland and the Netherlands continue to support the EC. So it could be a tough call for Europe’s largest economy.

Mr. Barkin believes that Beijing does not want a "major trade conflict."

"With its struggling economy and trade conflict with the US, China needs to ensure that the European market remains welcoming to its products. If it reacts too strongly, there is a risk of counterproductive effects," he asserted.

Economist Sebastian also noticed that China only responded in a threatening way.

"Spices, pork and dairy are all investigations, still in the balance. The Chinese side does not want to 'pull the trigger' immediately, but only wants to threaten EU members," he said.

The EU is expected to vote on import duties on Chinese electric vehicles this week. If approved, the new tariffs would be up to 45%, four times the current rate, and would come into effect in November.

Source: https://baoquocte.vn/cang-thang-trung-quoc-eu-thoi-diem-quan-trong-dang-den-gan-bac-kinh-chua-thuc-su-bop-co-288146.html