In retaliation for EU tariffs on Chinese electric vehicles, China could impose tariffs on products such as European pork and dairy products, as well as brandy and luxury goods.
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The European Union (EU) recently revealed that it has provisionally concluded that it will apply tariffs on Chinese electric vehicles of up to 38.1%. The objective is to stop the avalanche of chinese electric vehicles much cheaper than they are imported into the EU, which in turn poses a threat to competition from electric vehicles manufactured in Europe.
Major Chinese automakers that could face increased tariffs are Geelywhich could see 20% tariffs, BYD17.4%, and SAIC38.1%.
It is also likely that other Chinese electric vehicle manufacturers face tariffs between 21% and 38.1%depending on whether or not they have cooperated with the EU investigations into this matter.
Apart from Chinese electric vehicle manufacturers, a significant proportion of vehicles imported into China also come from companies such as bmw and tesla, who have set up huge factories in China. Its objective is to take advantage of lower production costs and subsidies to be able to offer its vehicles at competitive prices.
These tariffs are pending the conclusion of talks with the Chinese authorities, but they are likely to enter effective July 4. The tariffs are expected to be about the same amount as the current government subsidies China is believed to offer these automakers.
One of the main reasons for this measure is that The EU alleges that the Chinese government grants unfair subsidies to several manufacturersallowing them to sell at considerably cheaper prices in Europe.
However, this EU measure has raised concerns about the possibility of China retaliating by applying its own tariffs to some European sectors, which could mean a threat to the EU economy. If this were to happen, it could lead to a real trade war between the EU and China.
China has already hit back at the EU, calling these tariffs a protectionist act and urging it to reconsider them. It has also said it will do everything in its power to protect its own interests and automakers should these higher tariffs be introduced.
Chinese Foreign Ministry spokesperson Lin Jian said at a press conference, as reported by Reuters: “We urge the EU to listen carefully to objective and rational voices from all sectors, immediately correct its wrong practices, stop politicize economic and commercial issues, and adequately manage the economic and trade frictions through dialogue and consultation.”
Refering to possibility of a full-blown trade war with ChinaJens Eskelund, president of the European Chamber of Commerce in China, said, according to the Associated Press: “It’s a bit like watching a traffic accident unfold in slow motion. The accident hasn’t happened yet and it’s still possible to find a way out. “It’s becoming urgent.”
Which European sectors could suffer tariff retaliation from China?
As for the sectors most likely to suffer tariff retaliation from China, should the EU go ahead with tariffs on EV, the brandy and other alcoholic beverages They could be one of the most affected.
This is due to the fact that China has already launched an anti-dumping investigation into brandy imported from the EU in March, when the EU had dropped hints about possible tariffs. GO. The main companies affected by the investigation have been Pernod Ricard and Remy Cointreau.
The EU food industry is another sector that could be affected. China is already known for taking retaliation with food tariffsas seen a few years ago when it banned seafood imports from Japan due to a dispute over maritime waters and Japan’s strategy of dumping treated nuclear wastewater into the sea.
For this reason, EU food companies, such as producers of Pork Meat and dairy products, are on tenterhooks at the moment, following reports that Chinese domestic food companies have called for investigations into some EU food imports. These are most likely anti-dumping or anti-subsidy investigations, which even if later debunked, could paralyze trade for a long period of time while the investigation continues.
However, this could also end up hurting China itself, as the EU was the country’s second-largest importing partner in 2023, with China importing around 36% of its dairy imports from the bloc last year. Some of the most imported products were cream, whey powder and fresh milk.
If the trade war escalates, New Zealand, currently China’s largest supplier of dairy products, could be prepared to fill the gap. Australia, another major import partner, could also benefit.
He EU luxury goods sector could also be affected, as China is a major market for products such as bags, perfumes, shoes, clothing and other accessories from brands such as LVMH, gucci, Prada and others. European watches and jewelry are also in strong demand in China.
With several luxury goods companies already facing a drop in demand following the pandemic, due to the cost of living and rising interest rates, this could derail them further.
ADVERTISINGIn the same way, China It is a key component in the supply chain of critical minerals worldwide, and has already shown that it is more than willing to use this sector as a tool in trade wars. This was seen when China stopped the export of rare earth minerals to Japan, due to the two countries’ disagreement over the Senkaku Islands.
If things with the EU heat up, China could also do the same with the EU, which could prove disastrous for the continent’s ecological transition goals. The EU has also recently launched a antidumping investigation into Chinese biofuels imported into the block.
