MNI: EU To Maintain Piecemeal De-Escalation On China Trade

MNI (BRUSSELS) - China’s low-key response to the EU’s slight concession on tariffs recently imposed on China-made electronic vehicles (EVs) suggests that trade relations between the two have entered stand-off mode with negotiations on a more permanent solution sidelined until after the US election in November, Brussels-based officials told MNI.

The comments follow the announcement by Beijing of an anti-subsidy investigation into EU dairy exports to China after Brussel’s decision to largely maintain its tariffs on Chinese EVs with a slight downward tweak for cooperative Chinese car firms. (See BRIEF: EC Makes Slight Cuts In China EV Tariff Proposals)

“China does not want the escalation and trade war, but has to take the responding steps, which are rather marginal - 4% of its total imports. This is not sufficient material for serious negotiations. If by any chance the situation aggregates – as may be the case after the US elections - then a solution can’t be excluded,” one EU official commented.

“The Chinese are tightening the screws slowly, but in a targeted way. Farmers are the most vocal bunch in the EU,” the EU source added, summing up the likely course of events as follows: “negotiations yes, solution ... maybe. But I rather suspect that both sides will take unilateral measures making some of them less painful as a sign of stepping back and avoiding escalation”.

BACK FROM THE BRINK

The Commission’s decision to adjust downward its EV tariffs while keeping them in place is a good example of a new back-from-the-brink approach of the two sides and the muted Chinese response can be seen in a similar way. While Commission officials are adopting a serious tone in public to China’s anti-dumping investigations into EU pork, cognac and dairy seriously, they note that, taken together, they amount to only 4% of total EU-China trade of EUR739 billion last year.

Viewed from Brussels, Canada’s decision to implement the same 100% tariffs on Chinese EVs as the US and the low-key response from Chinese officials, as reported by MNI earlier this week, aligns with a sense that Beijing is seeking a route to de-escalation (see MNI BRIEF: Canada Sets 100% Tariff On Chinese EVs, Mirrors US) “That just shows that the US is keeping up the pressure on its policy line," the EU official observed. "Canada is a low hanging fruit and their trade is very much aligned with the US. The US could not keep the back door open. China knows that and its reaction was therefore quite formal but low key - no immediate threat of countermeasures.”

GREEN OWN GOAL

EU Parliament MEP Iuliu Winkler, a member of the assembly’s International Trade Committee, told MNI that he thinks the EU now needs to reconsider the radical Green Strategy of the last five years which has backfired: “The EV honeymoon is over, consumers are not really enthusiastic anymore and the EU really has to reconsider. Is the Green Transformation an EU transformation or a Chinese one? EU subsidies are fuelling China’s industries. I approve the tariffs in this case.”