MNI: China Expecting EU Tariffs On Electric Vehicles-Advisors

China and the European Union are unlikely to reach agreement before a July 4 deadline for Brussels to impose provisional tariffs of up to 38% on Chinese electric vehicles, but Beijing still hopes for compromises to reduce the definitive levies due within four months, former trade officials and advisors told MNI.

China will make no big concessions this week, said Zhou Xiaoming, former deputy representative of China’s Permanent Mission to the UN, who believed an announcement of provisional measures on July 4 was “highly likely”.

“But time and room remains for preventing permanent tariffs in the next four months,” Zhou said, adding that China is looking for more EU members' support, including some of Eastern Europe.

A negotiated settlement could lower levies to 10-15%, from the provisional weighted average of 25%, said Zhao Yongsheng, director of the French Economic Studies Center at the University of International Business and Economics, noting that European leaders including French President Emmanuel Macron might see cheaper Chinese vehicles as attractive to voters.

In the longer run, the general prospect of increasing trade barriers may prompt Beijing to increase overseas green investment to help ease tensions, as well as to expand its markets in Asia, Africa and Latin America, said Zhao, also a professor at Sorbonne University in Paris.

RIGHT TURN

Meanwhile the rightwards shift in EU politics might turn sentiment against China, even amongst centrist parties, said Huo Jianguo, former head of the China Academy of International Trade and Economic Cooperation at the Ministry of Commerce.

“This will toughen Brussels’ negotiation stance,” Huo said.

China’s Ministry of Commerce had not responded to an MNI request for comment on the topic of this article by time of publication.

The EU announced on June 12 that it would provisionally impose up to 38% of duties on imported Chinese EVs starting July 4, after which a definitive decision would be made within four months. (See: MNI: China Hopes For Deal With EU On EV Tariffs - Advisors - Bonds & Currency News | Market News)

A source close to EU trade officials confirmed that the Commission feels obliged to proceed to implementation of the preliminary duties. The source said that EU-China talks are now more focused on “keeping things calm” and “avoiding overspill” into other policy areas.

“The calculation is on Chinese restraint - who does not want to avoid a full-scale trade war? But there will be repercussions,” the source said. “The Chinese will retaliate on high duty vehicles, pork, cognac and some luxury stuff.”

Another EU source noted that China is putting in place legislation to require export licences for additional critical raw materials crucial for the EU’s green transition.

“They still have to take action to actually tighten these export controls but I guess they will make a bit of a fuss about it because they are passing the law to scare the Commission.”