With billions of dollars in trade at stake, China and the European Union have agreed to engage in talks to try to resolve an escalating dispute over tariffs.
China’s Commerce Minister Wang Wentao and Valdis Dombrovskis, the European Union’s trade commissioner, will hold discussions on the European Union’s plan for tariffs on electric cars from China, China’s commerce ministry said late Saturday.
Hours earlier, Robert Habeck, Germany’s vice chancellor and economy minister, said the European Union was ready to hold consultations, and he expressed hope the tariffs could be avoided.
This month, the European Commission, the European Union’s executive body, proposed tariffs of up to 38 percent on electric cars from China, on top of the existing 10 percent tariff on imported cars. The commission said it found China’s electric car sector was heavily subsidized by the government and state-controlled banking system. Chinese exports of electric vehicles pose a growing challenge for European automakers.
Mr Habeck, speaking in Shanghai after meetings in Beijing, defended the tariffs. “These tariffs are not punitive,” he said, adding that the tariffs are intended to offset subsidies that violate World Trade Organization rules.
It’s unclear what a potential trade deal might look like. Executives at Volkswagen and other European automakers have demanded that Chinese manufacturers build cars in Europe with European workers earning European wages, rather than importing cars from China.
But Chinese automakers have already built dozens of electric car factories in China with what the European Union describes as extensive subsidies, and are still building more factories.
Before agreeing late Saturday to the talks, Mr. Wang, China’s commerce minister, who had met with Mr. Habeck accused the European Union of violating WTO rules.
The National Development and Reform Commission, China’s top economic planning agency, said in a statement that “China will take all measures to protect the legitimate rights and interests of Chinese companies.” He added that the tariffs were not in line with international efforts to address climate change.
Tariffs would put Germany in a tricky position. German automakers have extensive operations in China and worry they will be hurt by retaliatory trade actions from Beijing.
On Saturday in Beijing, Mr. Habeck visited several Chinese economic ministries but did not meet Premier Li Qiang, official no. 2 of China. Mr Habeck then flew to Shanghai to hold a press conference, but declined to comment on why he had not met Mr Habeck. Li, who is in a way his counterpart.
Mr. Habeck criticized China for supplying Russia with goods that have both civilian and military applications for its war against Ukraine. China’s trade with Russia grew by more than 40 percent last year, and half of the growth was related to these dual-use goods, he said.
“These are technical goods that can be used on the battlefield and this must be stopped,” he said.
But the focus of Mr. Habeck’s trip was the trade dispute. He was scheduled to speak Sunday in Shanghai with German business leaders and then visit nearby Hangzhou, a technology hub.
World Trade Organization rules allow tariffs intended to offset the effects of subsidies. For its part, China denies that it improperly subsidizes its electric vehicle companies and says its leading role in the industry worldwide is the result of efficient manufacturing and innovation.
Anticipating the tariffs, China’s commerce ministry in January took the first steps toward imposing tariffs on imports of cognac and other wine-based spirits, mostly made by France, one of the countries that has led calls for tariffs on electric cars. China. On Monday, China’s commerce ministry threatened to impose tariffs on pork imports from Europe.
And state-controlled media in China reported last week that China’s auto industry is asking the commerce ministry to impose tariffs on gasoline car imports from Europe, a move that would mainly affect German automakers.
Mr Wang, the trade minister, called on Germany to help end EU tariffs. “It is hoped that Germany will play an active role in the EU and promote the EU and China to move towards each other,” the ministry said in a statement on Saturday.
China, the world’s biggest car market, has almost halved its imports of German cars in the past five years as its domestic automakers have become increasingly competitive. Chinese car companies dominate worldwide production of gasoline-electric hybrids and electric vehicles, which now nearly match gasoline car sales in China.
But many of China’s wealthiest customers still covet German brands. Mercedes sells more of its most luxurious cars, the German-made Maybachs, in China than in the rest of the world combined.
German automakers also have joint ventures with Chinese companies to assemble cars in China. Volkswagen is making further major investments in manufacturing and engineering in China as it begins to cut staff in Germany.
Germany is crucial to China’s efforts to stop the end of new European tariffs this autumn. This was also the last time that China and Europe were involved in a major trade dispute.
In 2013, under pressure from China, Germany rallied European governments to drop the European Commission’s proposed tariffs on solar panels from China. Chinese solar panel manufacturers quickly flooded Europe and the European industry collapsed.
Leaders in Europe seeking tariffs on China’s electric vehicles argue that the European car industry now faces a similarly dire threat.
To block the tariffs, Beijing would need to convince a majority of European Union countries, representing at least 65 percent of the bloc’s population, to overrule the European Commission.
In its response to Europe’s tariffs, China is expected to target key countries, analysts said.
The potential tariffs on petrol cars will hit Germany, the bloc’s most populous country, with 19 per cent of the union’s population. Italy is the third most populous and it also exports luxury petrol vehicles to China – Ferrari and Lamborghini sports cars.
France is Europe’s second most populous country and China’s potential Cognac tariffs target one of its national symbols.
Spain, the fourth most populous country in Europe, is the main European exporter of pork to China, a product that Beijing has also threatened to penalize.
Beijing allowed German automakers, led by Volkswagen, to open car factories with Chinese manufacturers in the 1980s, bypassing China’s then 100 percent tariffs on imported cars. China cut tariffs on imported cars to 25 percent in the years after it joined the World Trade Organization in 2001, and in 2018 it further cut tariffs on most imported cars to 15 percent in a move to ease trade tensions with the United States. the United States during the Trump administration. .
In addition to the 15 percent fee, China also collects a 10 percent tax from buyers of gasoline cars. Cars and sports vehicles with very large petrol engines, which are mainly imported, pay an additional tax of 40 percent.
Li Ti AND John Liu contributed to research.