Tariffs on Chinese electric cars: Last chance for Germans in Beijing

"It is important to understand that these are not punitive customs duties," Robert Habeck said Saturday, according to a recording of his speech sent to AFP by the German embassy. He also noted that while such practices are used in the United States, Brazil and Turkey, Europe intends to act differently. Robert Habeck met with Zheng Shanjie, head of China's influential economic planning agency (NDRC), and Chinese Commerce Minister Wang Wentao in Beijing on Saturday, June 22.

"As far as Europe is concerned, I can say that the doors are open and that the invitation or offer to talk has been made several times. Now it has to be accepted," Robert Habeck told a news conference in Shanghai on Saturday. However, the message of appeasement was met with a warning from China's commerce minister on Saturday.

"If the EU shows sincerity, China would like to begin negotiations as soon as possible," Wang Wentao said, according to a video shown by English-language TV station CGTN. He also said that if the EU persists, the government will take all necessary measures to protect Chinese interests and their legal rights.

If there is no compromise by July 4, the European Commission will impose increased duties of up to 28% on imports of Chinese electric cars. Brussels accuses Beijing of distorting competition by massively subsidizing the sector. The Chinese government claims to have spent more than 200 billion yuan (25.5 billion euros) between 2014 and the end of 2022 on subsidies and tax deductions related to the purchase of electric cars. That's enough to level Chinese manufacturers with their U.S. rivals, which have received less assistance. The surcharges will become final from November.

As such, Vice Chancellor Habeck is making one last visit to China to avoid a trade war between the EU and the Asian giant. And for good reason, as the Chinese are opposed to additional customs duties. German automakers, for their part, fear a major trade conflict with Beijing should China retaliate with measures that would undermine their business in this crucial market. For Mercedes, Volkswagen and BMW, China accounts for up to 36% of sales. In 2023, China remains Germany's top trading partner for the eighth consecutive year, although it has fallen behind the United States again since the beginning of the year.

According to Jacob Günther, an analyst at the MERICS Institute, Beijing's goal will be to "force Germany to play a more active role in abolishing or at least easing" European customs duties on electric cars. However, he believes the minister's chances of getting China to reduce its subsidies on electric cars are very limited. Convincing China to "limit retaliatory measures" would already be an excellent result, the analyst believes.

China regularly denounces the surcharges as "purely protectionist" and accuses European authorities of aggravating bilateral trade relations. It has vowed to take "all measures" to protect its interests. On Monday, Beijing announced the beginning of an anti-dumping investigation into imports of pork and pork-based products from the European Union, jeopardizing Spanish exports. At the same time, experts say China has an interest in avoiding escalation with the EU at a time when other countries such as the United States, India and Brazil are also seeking to protect their economies from Chinese imports.