China threatens 25% tariffs on imports from EU and US automakers

According to the media outlet Automotive News Europe, China plans to retaliate against the tariff hike from the Biden Administration, and a similar plan from the EU is expected within the coming weeks. China is considering elevating these duties from 15% to 25%

Elevated tariffs from Chinese customs could impact US and EU automakers, exacerbating already strained international trade relations. These reviewed levies would affect cars with a combustion engine with a minimum displacement of 2.5 liters.

According to the World Trade Organization ruling, China is entitled to impose a tariff as high as 25% on these vehicles. However, the nation has also threatened to go one step further and impose heavier duties on other products, such as wine, illustrating the acceleration of trade tensions.

A resolute counteraction

China is preparing an answer as the EU nears a crucial deadline (set by the former) to release the results of its investigation into imported battery electric vehicles and alleged unfair subsidies. The EU has until early June to determine whether it will impose tariffs on Chinese products.

Despite these threats, the European Union has remained resolute until now. Brussels is determined to counteract Chinese subsidies and overcapacity with a conclusion to its EV probe, signaling a firm stance against Beijing.

These actions are hardly supported by German automakers and some others, for whom the Chinese marketplace is a nexus for their largest trade region worldwide. Tesla and Volkswagen join Mercedes and BMW in taking a moderate stance.

In a message on social media, Arno Antlitz, the auto group’s CFO, stressed the need for European manufacturers to cut costs to remain competitive with Chinese counterparts as an alternative. He suggested that European manufacturers use the next two to three years to enhance their competitiveness, questioning the long-term effectiveness of the current tariff discussions.

Also, the two ‘French’ car makers, Renault and Stellantis, are changing their attitude towards the problem. Where they were fierce advocates of heightening the EU’s import tariffs initially, they are now opposed to EU interference.

The solar panel scenario

This debate shows a strong divide between industry captains and politicians. Enterprise Minister of Italy Adolfo Urso, speaking at the Trento Festival of Economics last week, reiterated the need for Europe to follow the US’s example by raising duties on certain Chinese products, particularly electric cars, to the same high level. The US imposed 102.5% instead of the current 10% in the EU. Urso warned that without such measures, European industry could face a severe economic downturn.

As the world’s largest electric vehicle producer, China is concerned about potential tariffs from its trade partners. Again, according to the West, it seeks to cool off the overcapacity in its home market. “The world cannot absorb China’s surplus production,” Commission President Ursula von der Leyen said following a meeting with Chinese leader Xi Jinping in Paris earlier this month.

However, there’s discussion about the size of the Chinese overcapacity behemoth. As an example, considering China’s population is over 27 times larger than South Korea’s, its electric vehicle production is approximately eight times less per capita than that of its Asian neighbor. But European politicians fear a similar scenario to the solar panel industry, where a dominating 80% nowadays is in Chinese hands.

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