China Considers 25% Car Tariff in Response to US, EU Actions
China Considers 25% Car Tariff Against US, EU - Trade Relations May Deteriorate In The Coming Weeks
In response to the recent tariff increases on Chinese tech imports by the Biden administration, Beijing is contemplating its countermeasures. These import tariffs notably include computer chips, EV batteries, and medical technology products.
On Wednesday, shares of European luxury automakers like BMW, Mercedes-Benz, Tata Motors (Jaguar Land Rover), and Volkswagen Group (Audi) all closed lower. This was following a stern and foreboding article by the Chinese state-run Global Times. The article suggested that China should "think about increasing the temporary tariff rate on imported cars with large-displacement engines, to reduce imports. This would be part of the nation's wider efforts to lower emissions and foster the green development of the auto industry."
China has hinted at the possibility of imposing tariffs as high as 25%, a significant rise from the current duty rate of 15%. The Global Times article, citing a Chinese industry insider, criticized the 'protectionist moves' emerging from Washington and the West.
Chinese state-owned SAIC Motor
In a related development this week, the China Chamber of Commerce to the EU (CCCEU) issued a warning. This seemed to be part of a coordinated messaging campaign. The CCCEU stated that it was "informed by insiders that China might consider increasing temporary tariff rates on imported cars equipped with large-displacement engines."
The potential action could have implications for European and US carmakers. This is especially in light of recent events such as Washington's announcement of tariff hikes on Chinese electric vehicles and Brussels' preparations for preliminary measures in a high-profile anti-subsidy investigation into Chinese EVs," according to the chamber statement.
To recap, the European Commission initiated an investigation in October. It officially launched "an anti-subsidy investigation into the imports of battery electric vehicles (BEV) from China. The investigation will first determine whether BEV value chains in China benefit from illegal subsidisation and whether this subsidisation causes or threatens to cause economic injury to EU BEV producers."
The investigation led by EC President Ursula von der Leyen aims to determine if this violates the WTO anti-dumping agreement. The deadlines set out to potentially impose duties is July 4.
China is retaliating against both Europe and the US, as observed by the South China Morning Post:
Beijing has indicated that it won't take either gambit lying down . On Sunday, the Chinese Ministry of Commerce announced an anti-dumping investigation into imports of polyoxymethylene copolymer - a chemical commonly used in automotive engineering - from the US, EU, Japan and Taiwan .
It has already begun investigating alleged dumping in the European brandy sector, which is seen to target France's cognac exports . Paris has been a strong supporter of a tougher EU trade policy towards China.
As trade conditions between China and the West are expected to worsen in the coming weeks, von der Leyen on Tuesday sought to downplay a trade war in remarks from Brussels.
"I don't think that we are in a trade war. I have the motto: 'de-risk not decouple', and I think here it's very clear we are in the category of de-risking from China. We have decoupled from Russia," she said.
China is expected to be a central foreign policy talking point among both presidential campaigns going into November...
In a moment of "cognitive dissonance," Rand Paul accurately points out there's "not a lot of difference" between Biden and Trump on China, especially since Biden "jumped on the Trump Train" with respect to Tariffs. Both are obsessed with scolding and sanctioning China, Paul notes.
During the last Tuesday unveiling of the new US tariff hike, the Biden administration said: "Today, I am following through on my commitment to stand up to the People’s Republic of China’s unfair trade practices by issuing a formal proposal to modify the tariff actions." US Trade Representative Katherine Tai further vowed, "The President and I will continue to fight for American workers, and for our economic future and national security."
As trade tensions between China and the West continue to escalate, it's clear that the impact will be felt across various sectors. What are your thoughts on this development? Share your thoughts with your friends and join us for the Daily Briefing at 6pm every day.