With billions of dollars in trade at stake, China and the European Union have agreed to start talks to resolve the escalating dispute over tariffs.
China’s Commerce Minister Wang Wentao and Valdis Dombrovskis, the European Union’s trade commissioner, will hold talks on the European Union’s plan for tariffs on electric cars from China, China’s Commerce Ministry said late Saturday.
Hours earlier, German Vice Chancellor and Economics Minister Robert Habeck said the European Union was ready for consultations and expressed hope that tariffs could be avoided.
This month, the European Commission, the European Union’s executive body, proposed tariffs of up to 38 percent on electric cars from China, on top of an existing 10 percent tariff on imported cars. The commission said it found China’s electric car sector was heavily subsidized by the government and state-controlled banking system. China’s electric vehicle exports pose a growing challenge for European automakers.
Mr. Habeck defended the tariffs in a speech in Shanghai after meetings in Beijing. “These tariffs are not punitive tariffs,” he said, adding that the tariffs are intended to offset subsidies that violate World Trade Organization rules.
It is unclear what a possible trade deal might look like. Executives at Volkswagen and other European automakers have called on Chinese manufacturers to build cars in Europe, with European workers earning European wages rather than importing cars from China.
But Chinese automakers have already built dozens of electric car factories in China with what the European Union calls extensive subsidies, and are still building more factories.
Before agreeing to the talks late on Saturday, China’s Trade Minister Wang, who met with Mr Habeck, accused the European Union of violating WTO rules.
The National Development and Reform Commission, China’s top economic planning agency, said in a statement: “China will take all measures to protect the legitimate rights and interests of Chinese companies.” It added that the tariffs contradict international efforts to combat them of climate change.
The tariffs would put Germany in a difficult situation. German automakers have extensive operations in China and fear they will be harmed by retaliation from Beijing.
On Saturday in Beijing, Mr. Habeck visited several Chinese economic ministries but did not meet with Premier Li Qiang, China’s second-biggest official. Mr. Habeck then flew to Shanghai to hold a press conference and meet with German business leaders. He declined to comment on why he had not met Mr. Li, who is in some ways his counterpart.
Mr. Habeck criticized China for supplying Russia with goods that have both civilian and military uses for its war against Ukraine. China’s trade with Russia rose more than 40 percent last year, and half of the increase came from these dual-use goods, he said.
“These are technological assets that can be used on the battlefield and that has to stop,” he said.
But the focus of Mr. Habeck’s trip was the trade dispute. On Sunday he visited a BMW research center in Shanghai before heading to the nearby Hangzhou technology hub.
World Trade Organization rules allow tariffs intended to offset the effects of subsidies. China, for its part, denies that it is improperly subsidizing its electric vehicle manufacturers, saying its leading role in the industry worldwide is the result of efficient manufacturing and innovation.
In anticipation of the tariffs, China’s Commerce Ministry took the first steps in January to impose tariffs on imports of cognac and other wine spirits made primarily in France, one of the countries that has led the call for tariffs on China’s electric cars. On Monday, China’s Ministry of Commerce threatened to impose tariffs on pork imports from Europe.
And state-controlled media in China reported last week that the Chinese auto industry is calling on the Commerce Ministry to impose tariffs on imports of gasoline-powered cars from Europe, a move that would particularly hit German automakers.
Trade Minister Wang called on Germany to help eliminate European Union tariffs. “It is hoped that Germany will play an active role in the EU and promote rapprochement between the EU and China,” the ministry said in a statement on Saturday.
China, the world’s largest auto market, has almost halved its imports of German cars in the past five years as its domestic automakers have become increasingly competitive. China’s automobile companies dominate the global production of electric and plug-in hybrid gasoline-electric vehicles, which now almost match the sales of gasoline-powered cars in China.
But many of China’s wealthiest customers still crave German brands. Mercedes sells more of its most luxurious cars, the German-built Maybachs, in China than in the rest of the world combined.
German car manufacturers also have joint ventures with Chinese companies to assemble cars in China. Volkswagen is making further major investments in production and technology in China and at the same time is starting to reduce its workforce in Germany.
Germany is crucial to China’s efforts to prevent the final adoption of the new European tariffs in the fall. This was also the case in the last major trade dispute between China and Europe.
In 2013, under pressure from China, Germany called on European governments to lift the European Commission’s proposed tariffs on solar panels from China. Chinese solar panel manufacturers quickly flooded Europe and the European industry collapsed.
Leaders in Europe pushing for tariffs on Chinese electric vehicles argue that Europe’s auto industry now faces a similar threat.
To block the tariffs, Beijing would have to convince a majority of EU countries, representing at least 65 percent of the bloc’s population, to override the European Commission.
China is likely to target key countries in its response to European tariffs, analysts said.
Possible tariffs on gasoline-powered cars would hit Germany, the Union’s most populous country, where 19 percent of Union citizens live. Italy ranks third in population and also exports gasoline-powered luxury vehicles to China – Ferrari and Lamborghini sports cars.
France is Europe’s second most populous country, and China’s potential cognac tariffs target one of its national symbols.
Spain, Europe’s fourth-most populous country, is the leading European exporter of pork to China, a product that Beijing has also threatened to punish.
In the 1980s, Beijing allowed German automakers, led by Volkswagen, to open car factories with Chinese manufacturers, bypassing China’s 100 percent tariffs on imported cars. China cut tariffs on imported cars to 25 percent in the years after joining the World Trade Organization in 2001 and further reduced tariffs on most imported cars to 15 percent in 2018 to ease trade tensions with the United States during the Trump administration.
In addition to the 15 percent tariff, China also charges buyers of gasoline-powered cars a 10 percent tax. Cars and sport utility vehicles with very large gasoline engines, which are mostly imported, pay an additional tax of 40 percent.
Li You and John Liu contributed to the research.
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2024-06-23 04:11:05
www.nytimes.com
