MNI: EU Seen Imposing China Tariffs Despite Retaliation Nerves
Diplomatic and official sources anticipate the EU's likely ruling on Chinese electrical vehicle imports.
The European Commission is likely to impose tariffs on Chinese electrical vehicle imports when it announces findings of an anti-subsidy investigation in coming weeks, but European Union member states continue to be worried by the prospect of retaliation from Beijing if Brussels follows the U.S. in taking a tough stance, diplomatic and other official sources told MNI.
"I am afraid that the Commission will feel that they have to go forward with it. Otherwise, they seem weak and they don't want to look weak," one diplomatic source said, noting that tariffs are unlikely to be more than 25%, in contrast to the 100% levy recently imposed by the U.S. earlier in May. "That could be a sweet pill for China if they see that it's not 25%, but 20% or lower.”
Officials had earlier told MNI they expected the U.S. move could prompt Brussels to follow suit with tariffs around 25% to 35% or higher, but member states have voiced disquiet. German Finance Minister Christian Lindner, whose country has major investments in China, urged the Commission to step back from the brink of trade war at last week's G7 finance meeting in Stresa, while China has targeted French drinks companies with anti-dumping probe into its imports of cognac. (See MNI EM: EU Tariffs On China EVs Seen Higher After U.S. Move)
COGNAC OR CARS
"[French President Emmanuel] Macron is manoeuvring between wanting to defend Europe's EV sector and avoiding punitive tariffs on France's wines and spirits producers," the source said.
Another G7 official speaking anonymously told reporters that China must not be treated as an "enemy" but as a "partner" and urged a "common assessment" by the G7 and the IMF of China's alleged overcapacity in key strategic sectors such as EVs, batteries and solar panels.
Italian officials chairing the Stresa meeting struggled to find common ground between the U.S. and its European partners, eventually delaying more concrete action on China until the June G7 summit to provide time to agree a common EU-27 position.
"It's a huge dilemma for so many EU countries and businesses dependent on Chinese supply of key technologies and supplies. They are effectively trapped," an EU industry source said, pointing to China’s one-third shares of global manufacturing and supply chains.
There should be no rush to impose tariffs on China, an Italian source told MNI, echoing Finance Minister Giancarlo Giorgetti, who argues that the world is entering a new phase of globalisation. Italian officials want the EU to be able to develop its own EV industry while keeping the door open to Chinese imports, the source said. (See MNI: Watered-Down EU Deal Points To Resistance To Draghi Plan)
SECURITY FEARS
Some sources also noted the security dimension to the Stresa stand-off.
“We don't want to push and alienate China so much that they become even more overt in their support of Russia," one European official said.
Another pointed to comments last year by Commission President Ursula von der Leyen, who called for Europe to “de-risk” its relationship with China, rather following the U.S. in “decoupling.”
"I think the U.S. is more in the business of containing China's rise. For us it's not about being number one or two, it's about fair competition and trying to coexist," the official said.
The EU is due to announce its findings on Chinese EVs in early June, although its precise timing may be delayed until after June 6-9 European Parliament elections. Von der Leyen will then seek the support of EU leaders in her bid for a second term, and will have to balance the need to be seen taking a tough enough line on China to demonstrate solidarity with the U.S. with that of soothing trade war jitters, while also placating countries which want protection for domestic auto makers.