Punitive tariffs on Chinese EVs would cause irreparable damage to trade ties

With the European Union due to vote very soon on imposing tariffs of up to 35.3 percent on electric vehicles made in China, last-ditch efforts to prevent China-EU trade frictions escalating and causing damage to their mutually beneficial economic cooperation have gained a rising sense of urgency.

The EU’s 27 members are scheduled to vote on Sept 25 on the tariffs proposed by the European Commission on the grounds that Chinese electric car manufacturers have unacceptable competitive advantages thanks to high subsidies from the government. The tariffs, to be imposed on top of the bloc’s standard 10 percent import duty on cars, will come into force by the end of October unless a qualified majority of 15 EU members vote against the levies.

In an advisory vote in early July, 11 countries approved he provisional rates, while four voted against them, and nine abstained.

A number of EU states have since expressed their opposition to them, and have called for dialogue and consultations. “We don’t need another trade war,” Spanish Prime Minister Pedro Sanchez said during his recent visit to China, adding that his country advocates talks to prevent potential damage to trade relations. 

Given that Spain was among the major EU states that supported the European Commission’s proposal to impose additional duties on Chinese-made EVs in the advisory vote in July, its change of mind, which reflects “rational and objective thinking”, is especially welcome as that reflection on the matter shows the wisdom of finding a political solution to the dispute.

German Chancellor Olaf Scholz has voiced his support for Sanchez’s position, saying that this “direction of travel is one that we share”. And German Vice-Chancellor Robert Habeck, in a meeting with visiting Chinese Commerce Minister Wang Wentao on Tuesday, emphasized that the EU and China should avoid a damaging trade war at all costs.

“We absolutely want to avoid a trade conflict with spiraling tariffs that ultimately harms both sides,” he said.

The EU has committed to phasing out the sale of conventional cars by 2035, and with their cutting-edge technology and products, Chinese EV companies are playing a pivotal role in driving Europe’s green transportation revolution. Rather than imposing curbs on Chinese EV imports, it serves the EU’s green transition ambition to deepen cooperation with China, given that its own automotive industry has been slow in shifting away from internal combustion technology.

In the age of economic globalization, restrictive trade measures will inevitably cause damage to all trading partners. Moreover, protectionist policies may fail as they often lead to higher domestic prices that reduce consumption, according to a report issued recently by the World Trade Organization.

Thus China has always called for reaching a solution with the EU in line with the WTO rules so as to avoid the escalation of the trade dispute. In an effort to ease the EU’s concerns about Chinese EV imports, Chinese EV makers recently offered a minimum import price proposal, but it was rejected by the European Commission.

Olof Gill, the commission’s trade spokesperson, said the commission had rejected “offers for price undertakings” by several Chinese auto exporters, as none of the offers could be “effectively monitored and enforced” to “eliminate the injurious effects of subsidies”.

If the EU does impose hefty tariffs on Chinese-made EVs, it will not only disrupt the stability of the global automotive supply chain and compromise the global efforts to address climate change, but also lead to China taking countermeasures.

The commission’s spokesman said that the EU remains “open to a negotiated solution”, and China on its part is determined to persist in holding consultations with the EU “until the last moment”. It is to be hoped that a solution can be found as a trade war is in the interest of neither side.

Editorial, China Daily