China to retaliate against EU import tariff

CHINA has announced that it will seek to retaliate against the recently announced EU-China tariff as the country’s automotive manufactures call on Beijing to increase tariffs on imported European petrol-powered cars.

According to China’s Global Times, and as revealed via Reuters, China’s automotive industry “called on the government to adopt firm countermeasures (and) suggested that positive consideration be given to raising the provisional tariff on petrol-powered cars with large displacement engines” in a meeting held in Beijing this week.

The meeting, organised by China’s Ministry of Commerce, was attended by representatives from BMW, BYD, Mercedes-Benz, Porsche, Renault, SAIC, Stellantis, and Volkswagen with the aim of placing pressure on Europe and lobby against the tariffs announced last week.

Speaking with Reuters, a spokesperson for Mercedes-Benz said the group supports a liberal trade regime based on WTO (World Trade Organisation) rules.

“Against the background of globalisation and the economic interdependencies of our time, the motto for securing prosperity and peace is dialogue and constructive cooperation. We are counting on the efforts of politicians to continue this dialogue,” said the spokesperson.

Industry insiders say both Europe and China have reasons for wanting to reach a mutually agreeable solution in the months ahead to de-escalate tensions and avoid the addition of billions of dollars in new costs for Chinese EV manufacturers, as the EU process allows for review.

The Reuters article suggests the announcement to impose tariffs could trigger discussions between the EU and Beijing that aim to avoid their implementation.

“Personally, I think it is unfair to start a tariff war solely on the basis of China’s capacity utilisation rate and insufficient demand for China’s new energy vehicles,” said China Centre for International Economic Exchanges chief research fellow Zhang Yansheng.

“We can see that China has adopted a package of policies to solve the ‘overcapacity’ problem, so this year, next year, and into the next four years, China's capacity utilisation will continue to rise.”

Last month the Global Times reported that a Chinese government-affiliated automotive research centre had suggested China raise import tariffs on imported petrol-powered vehicles with engine displacements of over 2.5-litres to 25 per cent (from the current rate of 15 per cent).

Exports of passenger vehicles with petrol engines larger than 2.5-litres in displacement from Europe to China totalled 196,000 units in 2023, up 11 per cent on the year prior.

EU car exports to China were valued at €19.4 billion ($A31.2b) in 2023 while the bloc purchased €9.7 billion ($A15.6b) worth of electric vehicles from China.

Chinese authorities have previously hinted at the possibility of retaliatory measures through state media commentaries and interviews with industry personnel.

The same outlet further suggested that Chinese automotive manufacturers had planned to ask authorities to open an anti-dumping investigation into European port products, which China’s commerce ministry announced it would undertake this week.

It also urged Beijing to investigate EU dairy imports.

Beijing has already launched an anti-dumping investigation into (mostly) French-made imports of brandy and cognac in retaliation for the proposed EU import tariffs. More are expected to follow.

With Reuters