It was announced European CommissionAfter a year-long investigation, it imposed additional duties of up to 45.3 percent on imports of Chinese electric cars, justifying this by unfair government support for Chinese companies, which negatively affects competition in the European market.
This decision was not welcomed by Beijing, which rejected it outright, describing it as a “protective practice” that threatens to escalate trade tensions between the two parties. In response, China announced that it would take “all necessary measures” to protect the interests of its companies, and also filed a complaint with the World Trade Organization.
These developments raise questions about the repercussions of this trade war on the global electric car industry, and on economic relations between China and the European Union. Will electric cars be the first spark of a global economic war?
The European Union’s decision to increase duties on Chinese-made electric cars to about 45.3 percent came at the conclusion of investigations that caused division in Europe, as one year after the launch of its investigation related to addressing subsidy measures, the European Commission will impose additional duties ranging from 7.8 percent on Tesla products. And 35.3 percent on the products of the Chinese company SAIC, in addition to the standard car import duties imposed by the European Union of 10 percent.
A senior European Union official said, “The additional customs duties were officially approved on Tuesday, October 29, and will enter into force on Wednesday, October 30.” While the European Commission, which oversees the European Union’s trade policy, said, “The customs duties are necessary to confront unfair support received by manufacturers in China.” It includes preferential financing and grants, in addition to land, batteries and raw materials at prices below market prices, and China’s spare production capacity of three million electric cars annually is equivalent to twice the size of the European Union market 100 percent in the United States and Canada, so the most obvious outlet for these electric cars is Europe.”
The Chinese Ministry of Commerce announced that it “does not accept” the tariffs imposed by the European Union on Chinese electric cars, and the ministry said in its statement that “China has repeatedly pointed out that the European Union’s anti-subsidy investigation into Chinese electric cars contains many unreasonable and non-conforming aspects.” “It is a protective practice of unfair competition.”
Beijing described the tariffs imposed by the European Union as protectionist and harmful to EU-China relations and automobile supply chains. It launched investigations this year into imports of brandy, dairy products and pork from the European Union, and also filed a lawsuit against the EU measures before the World Trade Organization.
The European Commission held eight rounds of technical negotiations with China to find an alternative to customs duties, and said that “talks can continue after the imposition of duties,” as the two sides are examining the possibility of setting commitments to a minimum price for imported cars and agreed on Friday to hold another round, although… The Commission said that “significant gaps” remained.
According to a CNBC report viewed by the “Eqtisad Sky News Arabia” website, Ken Ping, head of investment strategy in Asia at CT Wealth, said, “Everything is considered. This is unfortunate, but it is not really big in terms of size.”
“The level of tariffs appears moderate,” Ping added, but noted that both the United States and the European Union would force Chinese producers to diversify their supply chains and increase production capacity outside China.
If China retaliates, he said, any tariffs are expected to focus on agricultural and luxury imports from Europe.
The trade conflict is ongoing and China is silently expanding
Speaking to the website “Eqtisad Sky News Arabia”, the economic expert and member of the Board of Trustees of the Middle East Center for Economic Studies, Hashem Akl, said that imposing European customs duties on… Chinese electric cars It could spark a full-scale trade war. He explained that the trade conflict between China and the United States has been ongoing since the administration of former President Donald Trump and continues under the administration of President Joe Biden, who confirms that China is complicating the chances of fair competition for American companies in the electric vehicle sector.
Akl believes that China, until now, has been silently pursuing a policy of expansion without a sharp reaction to American measures, citing the expansion of Chinese companies in markets close to the United States, such as the establishment of a BYD factory in Mexico, where the free trade agreement between Mexico facilitates Canada, the United States, and the access of Chinese cars to the American market without customs duties. Akl believes that this step represents a major challenge to the US trade protection policy, which imposes high fees on foreign electric cars.
He pointed out that China is not only expanding in the American market, but is also targeting new markets such as Brazil, Thailand and Australia, with moves to open factories in Europe, where Hungary was chosen as the location for the first Chinese car factory on the continent, and there are ongoing negotiations with German companies to establish joint factories. In Germany. Akl believes that European countries that opposed the decision, such as Germany and Hungary, may put pressure on the European Union to ease the new measures that were imposed under American pressure.
How is the European Union affected?
Economist Akl adds that the decision to impose customs duties on Chinese cars was met with opposition from some European countries that have significant commercial interests in China, as major European car companies increasingly depend on the Chinese market, which is a major center for luxury cars as a result of the prosperity of the middle class there. He points out that imposing duties on Chinese cars may lead to broad economic consequences for the European Union, given the large revenues that European companies achieve in the Chinese market.
Trade data revealed a significant increase in the value of Europe’s imports of electric cars manufactured in China, reaching $11.5 billion last year compared to only $1.6 billion in 2022, while China’s exports of electric cars around the world increased by 70% between 2022 and 2023. .
Akl concludes by pointing out that Chinese companies, such as BYD, may be able to absorb the impact of the new European tariffs, given their high profitability. According to Akl, BYD’s profits per car in Europe will remain one and a half times higher than its profits per car in the Chinese market, even after the imposition of the new fees, which reflects the strength of these companies and their ability to adapt to emerging commercial challenges.
In turn, economic expert Ali Hamoudi said in his speech to the Sky News Arabia website: “The customs duties imposed by the European Union on Chinese electric cars aim to address concerns about the alleged unfair subsidies provided by China to the electric car industry, but it is difficult to say conclusively.” Whether new European tariffs will lead to an all-out trade war with China.
intervening factors
Hamoudi pointed to several overlapping factors that could lead to escalation between the two sides, including:
- China’s reaction, meaning, will China’s reaction to the European tariffs be decisive? If China responds by imposing large-scale retaliatory tariffs on European products, the situation could turn into an all-out trade war. Historically, China has not hesitated to use tariffs as a trade weapon.
- Geopolitical climate: The imposition of these tariffs coincides with increasing tension in relations between the West and China on multiple fronts, from Taiwan to trade and technology. This tension may encourage both Europe and China to take tougher positions.
- Other countries: The trade conflict between Europe and China could lead to other countries joining in, expanding the scope of the trade war.
Economist Hamoudi also touched on the factors that may alleviate the severity of the situation, which are:
- Dialogue and negotiations: Europe and China may resort to dialogue and negotiations to avoid escalating the situation, and there is a mutual desire to avoid a comprehensive trade war, because it would harm both parties.
- Interdependence: There is significant trade interdependence between Europe and China. An all-out trade war would damage the economies of both parties.
- Internal pressures: Both Europe and China have internal pressures to avoid a trade war, and European and Chinese companies prefer stable trade relations.
- International organizations: Organizations such as the World Trade Organization can play a role in calming the situation, or arbitrating the dispute.
- Hamoudi believes that, “At the present time, it is difficult to accurately predict the development of the situation, as the imposition of European tariffs represents an escalatory step, but it is not inevitable that it will lead to a comprehensive trade war, but the possibility exists and depends greatly on the steps that both parties will take in the days and weeks.” “Coming.”
