2024-08-24 01:14:56
The EU and China are fighting for access to their respective markets. Tariffs are the weapon of choice. But Xi has a strategy to break European unity.
The economic battle between the European Union and China is entering the next round: After the EU decided earlier this week to maintain punitive tariffs on Chinese electric cars, China is striking back.
However, China’s leadership around ruler Xi Jinping is not targeting cars. Instead, he is threatening import tariffs on dairy products. This is not the first time that food has come into focus in the simmering trade dispute. Behind it is a plan to drive the European countries apart.
Chinese electric car manufacturers have been trying to gain a foothold in the European market for some time. They want to do this with particularly low prices. The EU has accused China of pushing down prices through excessive subsidies and thereby securing unfair competitive advantages over European car manufacturers.
Commission President Ursula von der Leyen then announced an investigation and then, as a first step, imposed additional tariffs of up to 37.6 percent. The final decision is expected to be made in October.
But in an interim step, the EU Commission has now specified the tariffs. These differ for the various manufacturers. For example, BYD was previously subject to a provisional punitive tariff of 17.4 percent, Geely to 19.9 percent and SAIC to 37.6 percent. These rates have now been reduced to 17.0 percent, 19.3 percent and 36.3 percent. US manufacturer Tesla will therefore receive an individual tariff rate of nine percent. Companies that cooperate with the EU and disclose their state support will be charged 21.3 percent (originally 20.8), while uncooperative companies will be charged the maximum rate of 36.3 percent.
How high the tariff rate ends up also depends on the amount of subsidies from which the individual companies benefit. However, the additional tariffs do not currently have to be paid. This also explains why China has so far only announced threats in the form of investigations and has not yet implemented higher tariffs in the food sector.
Another reason: The EU’s decision is not supported by all member states. Xi may therefore hope that the disunity among the EU states will increase by October.
Germany in particular has expressed skepticism on several occasions. In Berlin, government spokesman Wolfgang Büchner said that the federal government had taken note of the EU Commission’s decision and was evaluating it. They were counting on further talks with China. “The federal government still believes that an amicable solution is desirable.” An escalation of the trade dispute would harm both sides. German economists, however, are divided on the issue.
The reason for the German stance is the concern of German car companies that the Chinese government could, in return, make it more difficult for them to access the Chinese market, which is important to them. The German Association of the Automotive Industry (VDA) welcomed the fact that the Commission is now treating European manufacturers with joint ventures in China better than initially planned. However, the countervailing tariffs “further fuel the risk of a global trade conflict,” criticized VDA President Hildegard Müller. The industry’s concerns have not been confirmed so far. Probably also because Germany is already skeptical about the tariffs. Instead, China is now concentrating on sowing doubts in other European countries as well.
The Chinese Ministry of Commerce announced in Beijing on Wednesday that it would launch an anti-dumping investigation into imports of dairy products from the EU. Various types of cheese, milk and cream are affected. According to the report, China wants to examine 20 subsidy programs in EU countries, in particular those from Austria, Belgium, Croatia, the Czech Republic, Finland, Italy, Ireland and Romania.
The official reason: Chinese dairy industry associations are said to have complained about the high level of subsidies within the EU at the end of July. Even if that was the case, the announcement of the investigation is clearly to be understood as a reaction to the EU tariffs.