China-EU Tariff Dispute Unlikely to Escalate Further, Analysts Say
As China seeks resolution to its tariff dispute with the European Union (EU) regarding electric vehicles (EVs), analysts predict that Beijing will approach the situation with caution. Following China’s recent appeal to the World Trade Organization (WTO) to address the EU’s tariffs on its EVs, industry experts believe that both parties will avoid escalating the conflict significantly.
On Monday, China’s commerce ministry announced it had filed another complaint with the WTO, emphasizing that bilateral talks have not yielded satisfactory results. According to Shaun Rein, managing director of China Market Research, this latest action serves as a “warning shot” to Europe, indicating China’s strength while signaling a desire for cooperation. He anticipates a “measured” response from China as it navigates its economic relationship with Europe, particularly amid rising tensions with the U.S.
Since the implementation of the EU’s tariffs last Wednesday, discussions have surfaced regarding establishing minimum price commitments from Chinese car manufacturers as an alternative to the tariffs. The EU accounted for over 40% of China’s EV exports in 2023, making the economic stakes significant for both parties.
Sam Radwan, CEO of Enhance International, stated that the likelihood of the China-EU dispute escalating to the level of the U.S.-China trade tensions is low, primarily due to the EU’s dependence on China in its EV supply chain. The EU has increased tariffs on Chinese EVs to as high as 45.3% following a year-long investigation, prompting China to respond by targeting European exports like pork, dairy, and brandy.
European trade officials continue to engage in talks with their Chinese counterparts. Maros Sefcovic, the European Commission’s vice president, referred to China as the EU’s “most challenging trading partner” and expressed the bloc’s intent to be more assertive in addressing what it perceives as structural imbalances and unfair trade practices. Sefcovic emphasized that the EU does not seek trade wars but aims to rebalance its trade relationship with China.
Eugene Hsiao, head of China Autos at Macquarie Capital, noted that China will explore various avenues to pressure the EU into lowering tariffs. He suggested that a successful negotiation for lower tariffs could influence the level of investment Chinese EV manufacturers might consider for local production within the EU.
Reports indicate that China has advised its automakers to pause significant investment plans in European nations that support the tariffs, urging them instead to focus on countries that opposed the tariff measures. Notably, while countries like France, Poland, and Italy supported the tariffs in a recent vote, Germany, the EU’s largest economy and a significant car producer, opposed them.
In a meeting on Sunday, Chinese Commerce Minister Wang Wentao encouraged France to play a proactive role in fostering a solution that would benefit both the European and Chinese electric vehicle sectors. French junior trade minister Sophie Primas reaffirmed that while the EU aims to maintain trade relations with China, it would not compromise on critical issues.
