The Brewing EU-China Trade War
EU voted by majority for tariffs on Chinese EV's
A Brewing EU-China Trade War
There is probably no better example of how politics drives economics right now than the trade war between the United States and China. This economic conflict has been ongoing since early 2018, when President Trump began erecting trade tariffs and other barriers on Chinese goods, citing concerns over unfair trading practices and intellectual property theft. However, the United States is not alone. The European Union also has concerns about the impact of unfair trade practices by China, particularly on its large automotive industry. Europe’s political leaders are now taking corrective measures.
Last week, the EU voted by majority to erect tariffs of up to 45% on imports of battery electric vehicles (BEVs) from China, which are becoming increasingly more popular on European roads. The tariffs will mean higher prices for consumers but are intended to protect the European automotive industry. The decision is the culmination of an anti-subsidy investigation launched by the European Commission last year. The measures are due to take effect from the end of this month unless an amicable solution can be found.
The vote was, however, not unanimous. Several member states abstained while others, including Germany, an automotive powerhouse in the EU with a significant presence in the Chinese market, voted against them. However, the threshold to pass the measures was found with support from large European economies such as France and Italy, which voted for them. Germany may have feared that had they voted for such measures, it might have resulted in retaliatory tariffs on German cars. However, if that was the case, then their vote against the measures last week may have offered a reprieve. In response to the EU decision, China this week signaled a willingness to escalate trade tensions between China and the EU with initial asymmetrical retaliatory measures by coincidentally announcing anti-dumping measures on imported brandy originating from the European Union, which will primarily affect France.