(Bloomberg) — The European Union has unleashed one of its most powerful economic tools against China, imposing tariffs on electric vehicles that pose the risk of retaliation and backfires on domestic consumers and businesses. It enhances it.
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The European Union voted on Friday to raise tariffs to 45%, accusing the Chinese government of providing unfair subsidies to its automakers. China denies the claims and has threatened to impose its own tariffs on Europe’s dairy, brandy, pork and car sectors. The move is intended to comply with World Trade Organization rules, as the EU aligns with the United States’ more aggressive approach to countering China’s trade practices.
French President Emmanuel Macron said this week that Europe’s economic model “needs to be reset” and could pose an existential threat to the EU if it fails to take into account increased domestic investment and market protection by the US and China. I warned you that it’s sexual. The bloc’s leaders are expected to announce a new competitiveness roadmap next month.
Janka Oertel, director of the European Council on Foreign Relations, said the vote “marks a pivotal moment for the future of EU-China relations”. He said successful implementation of the tariffs would strengthen the EU and give it “momentum to continue to address market distortions, critical dependencies and new security challenges across a range of industries.”
Former European Central Bank President Mario Draghi shared similar concerns with Macron when he released his long-awaited report on Europe’s competitiveness last month. He said the EU would face “slow suffering” if it did not invest in economic transformation to better counter competition posed by Beijing and the United States.
The China International Trade Promotion Commission said in a statement posted on its official WeChat account on Saturday that domestic EV manufacturers are cooperating with the European investigation in “the utmost good faith” and that they are complying with WTO rules through pricing. He said he hopes to resolve the dispute. Promises and other means.
China’s Ministry of Commerce warned on Friday that the tariffs would “shake and hinder” the confidence of Chinese companies investing in Europe. State media outlet China Central Television said that if the tariffs are imposed, the EU will lose investment from China’s EV business and the opportunity to transform the auto industry.
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Draghi said economic growth in the EU continued to be slower than in the United States over the past two decades, driven by modest gains in productivity. And the effects of China’s slow response to the challenges posed by its aggressive industrial plans, which have invested billions of dollars in subsidies, are already being felt in some key industries.
Bloomberg Economics speaks…
“We still believe that the Chinese government will likely respond proportionately to the tariffs, for example targeting non-automotive EU imports, such as certain agricultural products.”
-Antonio Barroso and Gerard DiPippo. Click here for the full text of REACT
Volkswagen AG and Mercedes-Benz Group AG are struggling with declining relevance in China, while BMWAG has stumbled with costly recalls and Stellantis NV has suffered weak sales in the United States. Each company has issued profit warnings over the past month, with Volkswagen considering for the first time closing plants in its home base of Germany.
Shares in European automakers have fallen in the past few weeks following profit warnings, but rebounded slightly on Friday’s tariff vote. Tom Narayan, an analyst at RBC Europe, said the Stoxx600 Automotive and Parts Index rose because the news had already been priced in. Even as Ferrari NV continues to rise, the index is still down more than 10% this year.
Steady progress by Chinese companies in digital and clean technology sectors after years of failed attempts to address long-standing bilateral issues such as China’s industrial subsidies and limited access to vast markets. In the face of this, the EU has gradually hardened its stance. Facilitated by critical substance management.
As the world’s largest trading bloc, Europe is the main beneficiary of multilateralism, with half of its GDP tied to international trade. But a hostile international environment, including tensions between the US and China and battles to secure raw materials to boost economic growth, is forcing the EU to rethink its approach.
Why Europe is raising tariffs on cheap Chinese EVs: QuickTake
EV tariffs fulfill Europe’s current political priorities, but they are not without economic risks. The prospect of a full-scale global trade war in the wake of a once-in-a-generation inflation shock carries the risk of renewed consumer price pressures.
ECB policymakers are due to cut interest rates for the third time at the Governing Council’s meeting on October 17th, but this backdrop could cast doubt on their resolve. Apart from the trade environment, which is further threatened by the possibility of Donald Trump retaking the White House, the recovery in oil prices and the still resilient US economy may also give officials something to think about. be.
The World Bank warned in August that central banks’ battle against inflation was not yet won. The Washington-based agency notes that protectionist measures such as tariffs raise production and transportation costs, and that if such trade barriers persist, “producers will ultimately pass them on to consumers. There is a possibility.”
“We want a level and level playing field, but we don’t want a trade war. That’s why we need a negotiated solution to the countervailing duty issue now.” German Economy Minister Robert Habeck said in a statement on Instagram on Friday. “Europe is strong when united, but when divided it becomes a pawn of other countries. And unless Europe responds with unity, China’s aggressive industrial warfare will continue in other areas.”
–With contributions from Craig Stirling, Brendan Murray, Isolved MacDonogh, Kevin Whitelaw, Alberto Nardelli, Petra Sorge, Michael Nienaber, Stefan Nicola, and Tian Ying.
(Added China’s response in 6th paragraph)
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