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The China–European Union trade war refers to an ongoing trade war starting in 2024, following the institution of tariffs on China–manufactured and sold electric vehicles by the European Union in a divided 10–5 vote.

Background

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Main articles: Automotive industry in China and China–European Union relations

The EU and China are each other's largest trading partner as of 2023.[1]: 145  The EU is the PRC's largest trading partner,[2][3] and the PRC is the EU's largest trade partner.[4] In 2023 China accounted for 9% of EU goods exports and 20% of EU goods imports.[5] Between 2009 and 2010 alone, EU exports to China increased by 38% and China's exports to the EU increased by 31%.[6]

In terms of electric vehicle production, China has a significant advantage over other countries. The Chinese automotive industry holds a dominant position in the electric vehicle supply chain. Chinese manufacturers' share of the global EV battery market stood at 60% in 2022.[7][8] Industry analyst Chris Berry stated that China has a 10 to 15-year head start on the rest of the world in terms of EV battery supply chain.[9] China's strength in EV supply chain resulted in reduced costs in logistics, labor, and land management. Additionally, economies of scale are enabled by its large domestic EV market. China's EV manufacturing sector enjoys a cost advantage of 20 percent compared to Western markets such as those in the U.S. and Europe.[10][unreliable source?] In January 2023, according to an executive of French automotive supplier Forvia, Chinese carmakers can build an electric vehicle (EV) for €10,000 less than European carmakers, an overwhelming cost advantage that will put pressure on European manufacturers in their home market. Chinese manufacturers are able to produce electric vehicles at lower cost by having lower research and development costs, lower levels of capital spending, and lower labor costs than European rivals.[11]

During the 2023 France-China Summit, French President Emmanuel Macron called for Europe to reduce its dependence on the United States in general and to stay neutral and avoid being drawn into any possible confrontation between the U.S. and China over Taiwan. Speaking after a three-day state visit to China, Macron emphasised his theory of strategic autonomy, suggesting that Europe could become a "third superpower".[12] in a follow-up speech in The Hague to further outline his vision of strategic autonomy for Europe.[13] On 7 June 2023, a report by the pan-European think tank European Council on Foreign Relations (ECFR) found that most Europeans agree with Macron's views on China and the United States.[14]

Europe tariffs

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In September 2023, European Commission President Ursula von der Leyen announced EU would launch an anti-subsidy investigation into Chinese electric vehicle manufacturers. Von der Leyen claims that the global markets are "flooded" with cheaper Chinese electric cars, and their price is kept artificially low by significant state subsidies that distort the EU market.[15] Chinese newspaper People's Daily stated that the investigation proposed by the EU is a practice of protectionism in the name of "fair competition."[16] Carlos Tavares, the CEO of Stellantis criticized the investigation, stating it is not the optimal approach to global trade issues. He stressed the need for a global perspective to address challenges and promote competition and urged European politicians to support the region's automakers in competing with Chinese rivals offering competitively priced vehicles.[17][18]

Chinese companies have been able sell cars at significantly higher prices with larger profit margins in the EU than in the Chinese domestic market.[19] According to research group Rhodium Group, European duties of around 45 to 55 percent would be needed to render exports to the European market unappealing.[19]

Following the EU's anti-subsidy investigation, in June 2024, the European Commission (EC) announced new tariffs for Chinese-built electric vehicles (on top of an existing 10 percent tariff for all foreign-made vehicles regardless of engine type), which went into effect on 4 July 2024.[20] While analysts had variously predicted tariffs of between 10 and 25 percent, the EC would impose tariffs up to 38.1 percent. Electric vehicles made by BYD would face a 17.4 percent import duty, vehicles from Geely will be subject to a 20 percent duty, and vehicles from state-owned SAIC Motor would be subjected to the highest tariff of 38.1 percent. Manufacturers that neither received inspections nor provided information would face the maximum duty of 38.1 percent, while those that cooperated would be charged 21 percent.[21] On 26 June, after receiving more information from the affected companies, the EU reduced the proposed tariffs from 38.1 percent to 37.6 percent for SAIC, and 20 percent to 19.9 percent for Geely.[22][23]

China's Ministry of Commerce criticized the EU for "ignoring" facts, WTO regulations, objections from China, and appeals from various EU member states and industries. German Chancellor Olaf Scholz cautioned against limiting automotive trade with China, emphasizing the importance of keeping markets open. German automakers such as Volkswagen and BMW, who collectively sold 4.6 million cars in China in 2022, would be significantly impacted by trade tensions. Western manufacturers, including Mercedes-Benz, have opposed the tariffs, with concerns about market openness. Mercedes-Benz faces vulnerability as the Chinese market is its primary export market. Volkswagen said the decision's timing is seen as unfavorable for electric vehicle demand, raising concerns about potential trade conflict escalation.[24]

In July 2024, SAIC Motor issued a statement stating that it would formally request the European Commission to hold a hearing on the anti-subsidy investigation. The company claimed that the European Commission's investigation asked SAIC to disclose its commercially sensitive information including battery-related chemical formulas, which SAIC declined as it is beyond the scope of a normal investigation.[25][26][27] In September 2024, the EU rejected offers from Chinese electric vehicle makers for minimum import prices.[28]

In October 2024, EU leaders approved additional tariffs on Chinese EVs, despite opposition from five countries, including Germany, which warned the decision could harm its auto industry. The European Commission, having provisionally backed the tariffs after finding unfair state aid to Chinese manufacturers, was set to impose duties of up to 35.3% for five years starting in November 2024. While ten member states, including France and Italy, supported the tariffs, Germany and Hungary opposed them, citing potential damage to local carmakers. The decision sparked concerns of a trade war with China, which condemned the move as protectionist.[29]

Anti-dumping measures

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The EU has put in place numerous anti-dumping measures to protect its market from cheap products from China, such as steel.[30] In 2023, the EU started an investigation into Chinese biodiesel dumping.[31] In May 2024, the European Commission launched an anti-dumping probe into Chinese tinplate steel.[32]

See also

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References

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  1. ^ Contin Trillo-Figueroa, Sebastian (2023). "China and the European Union: More Partners than Rivals?". China and Eurasian Powers in a Multipolar World Order 2.0: Security, Diplomacy, Economy and Cyberspace. Mher Sahakyan. New York: Routledge. ISBN 978-1-003-35258-7. OCLC 1353290533.
  2. ^ "China - Trade - European Commission". ec.europa.eu. Archived from the original on 2020-10-02. Retrieved 2010-03-03.
  3. ^ EU replaces U.S. as biggest trading partner of China(09/15/06) Archived 2020-10-02 at the Wayback Machine china-embassy.org
  4. ^ EST, Tom O'Connor On 12/4/20 at 2:41 PM (2020-12-04). "China celebrates surpassing US in trade with EU for the first time". Newsweek. Retrieved 2021-01-24.{{cite web}}: CS1 maint: numeric names: authors list (link)
  5. ^ "Speech by President von der Leyen on EU-China relations to the Mercator Institute for China Studies and the European Policy Centre". European Commission. 30 March 2023.
  6. ^ "China - Trade - European Commission". ec.europa.eu. Archived from the original on 2020-10-02. Retrieved 2010-03-03.
  7. ^ He, Laura (2023-09-08). "China's automakers take the world by storm with electric vehicle push". CNN Business. Archived from the original on 2024-02-05. Retrieved 2024-04-11. "Overcapacity, economic slowdown, and the highly competitive automotive market at home are making Chinese [carmakers] look overseas for sales," said Dylan Khoo, an EV industry analyst at New York-based ABI Research.
  8. ^ "How did China come to dominate the world of electric cars?". MIT Technology Review. Archived from the original on 2024-05-19. Retrieved 2024-05-22.
  9. ^ Trovall, Elizabeth (2023-06-20). "Why China dominates the world's EV supply chain". Marketplace. Archived from the original on 2024-02-04. Retrieved 2024-05-22.
  10. ^ Wu, Yi (2023-08-10). "China's Electric Vehicle Supply Chain and Its Future Prospects". China Briefing News. Archived from the original on 2024-03-07. Retrieved 2024-04-11.
  11. ^ White, Joseph (2023-01-05). "China has a 10,000 euro cost advantage in small EVs, auto supplier says". Reuters. Archived from the original on 2023-11-29. Retrieved 2024-04-11.
  12. ^ Anderlini, Jamil; Caulcutt, Clea (9 April 2023). "Europe must resist pressure to become 'America's followers,' says Macron". politico.eu. POLITICO.
  13. ^ "Macron outlines vision for 'European sovereignty' at a Hague speech disrupted by hecklers". FRANCE 24. AFP. 11 April 2023.
  14. ^ Hanke Vela, Jakob; Camut, Nicolas (7 June 2023). "Most Europeans agree with Macron on China and US, report shows". politico.eu. Politico. Archived from the original on 8 June 2023.
  15. ^ Moens, Barbara; Busvine, Douglas (2023-09-13). "Von der Leyen hits China with electric vehicle subsidy probe". Politico. Archived from the original on 2023-10-26. Retrieved 2023-10-26.
  16. ^ "China strongly dissatisfied with EU's anti-subsidy probe into Chinese EVs". People's Daily. September 15, 2023. Archived from the original on 2023-10-26. Retrieved 2023-10-26.
  17. ^ "Stellantis CEO Tavares criticizes EU anti-subsidy probe". Automotive News Europe. Archived from the original on 2023-10-29. Retrieved 2023-10-29.
  18. ^ "Stellantis to Become a Strategic Shareholder of Leapmotor with €1.5 Billion Investment and Bolster Leapmotor's Global Electric Vehicle Business". Stellantis.com. Archived from the original on 2023-10-26. Retrieved 2023-10-26.
  19. ^ a b Butts, Dylan (2024-04-30). "Europe may need to impose tariffs of up to 55% to curb Chinese EV imports, research says". CNBC. Archived from the original on 2024-05-22. Retrieved 2024-05-22. Chinese companies such as BYD, which toppled Tesla to become the world's largest EV manufacturer last year, can sell cars at much higher rates and profit margins in regions such as the EU compared with the domestic market, despite paying a 10% tariff rate.
  20. ^ Verhelst, Koen; Zimmermann, Antonia; Klöckner, Jürgen (2024-06-12). "EU shocks China with EV duties of up to 38 percent". Politico. Archived from the original on 2024-06-12. Retrieved 2024-06-12.
  21. ^ Bermingham, Finbarr (2024-06-12). "Chinese-made electric vehicles slapped with up to 38% added EU import tariffs". South China Morning Post. Archived from the original on 2024-06-12. Retrieved 2024-06-12.
  22. ^ Zhang, Phate (2024-06-27). "EU makes minor cut in tariff rates to be imposed on Chinese EVs, report says". CnEVPost. Archived from the original on 2024-09-04. Retrieved 2024-07-30.
  23. ^ "EU said to reduce tariffs for some Chinese EV exporters". Automotive News Europe. 2024-06-26. Archived from the original on 2024-07-30. Retrieved 2024-07-30.
  24. ^ "EU to slap tariffs of up to 48% on EV imports from China". The Business Times. 2024-06-12. Archived from the original on 2024-06-12. Retrieved 2024-06-12.
  25. ^ "China's SAIC Motor files defence to EU's preliminary EV anti-subsidy ruling". The Economic Times. 2024-07-22. ISSN 0013-0389. Archived from the original on 2024-07-29. Retrieved 2024-07-29.
  26. ^ 中央通訊社 (2024-07-25). "中國上汽不服被加稅 指控歐盟要求交出商業機密 | 兩岸". 中央社 CNA (in Chinese). Archived from the original on 2024-07-29. Retrieved 2024-07-29.
  27. ^ "上汽回应欧盟委员会反补贴调查：拒绝提供商业敏感信息". tech.ifeng.com (in Chinese). Archived from the original on 2024-07-29. Retrieved 2024-07-29.
  28. ^ Blenkinsop, Philip (September 12, 2024). "EU rejects minimum price offers from Chinese EV exporters". Reuters. Retrieved September 13, 2024.
  29. ^ O'Carroll, Lisa (4 October 2024). "EU leaders back extra Chinese EV tariffs despite split vote". Retrieved 7 October 2024.
  30. ^ "EU lawmakers reject granting China the market economy status". 12 May 2016. Archived from the original on 24 May 2017. Retrieved 14 July 2017.
  31. ^ "EU to investigate Chinese biodiesel dumping allegation". Reuters. December 20, 2023. Retrieved December 20, 2023.
  32. ^ "EU launches trade investigation into Chinese tinplate steel". Reuters. May 16, 2024. Retrieved May 16, 2024.
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