China’s Ministry of Commerce said on Friday that the European Union continues to escalate trade relations, which could lead to a “trade war”, Reuters reported.
“The responsibility lies entirely with the EU,” said a ministry spokesperson in Beijing.
According to them, China hopes the EU will align its position closer to Beijing’s and resolve differences through dialogue, avoiding escalation of “trade disputes.”
These comments come after last week’s proposal by the European Commission to increase tariffs on imports of electric vehicles from China to 38% in some cases. Under the Commission’s proposal led by Ursula von der Leyen, taxes will rise to 17.4% for Chinese automaker BYD, 20% for Geely, and 38.1% for SAIC. Other companies that cooperated with EU authorities will pay tariffs of 21%, while those that did not will face 38.1%.
Currently, Chinese-made vehicles entering the EU are taxed at a rate of 10%.
Anti-competitive Import of Electric Vehicles from China
An investigation launched by the European Commission last year into the import of electric vehicles from China concluded that these Chinese companies, supplying an increasing number of electric vehicles to Europe, benefited from subsidies in their country of origin, giving them an unfair competitive advantage in the EU market.
Von der Leyen stated that European firms “often lose out in price competition to competitors benefiting from massive state subsidies.” She insisted that Europe must defend itself against unfair practices but stressed that communication lines with China should remain open.
Reaction to Proposed Tariffs
China’s Ministry of Commerce issued the statement on the possibility of a “trade war” with the EU just an hour before the arrival of German Economy Minister Robert Habeck in Beijing, where he is expected to hold talks with Chinese officials regarding the proposed European Commission tariffs.
China is Germany’s largest trading partner, and the German automotive industry heavily relies on exports to the Chinese market. German automakers oppose the tariff increase on imports of electric vehicles from China.
Concerns of German Automakers
BMW CEO Oliver Zipse warned from early last month that imposing tariffs on imports of Chinese electric vehicles could have unintended consequences. “Soon we will see that we are right,” Zipse said after BMW’s quarterly earnings report. BMW exports Mini EV and iX3 models from China to the European market.
German competitors Volkswagen and Mercedes-Benz also depend on revenue from their business in China. China is BMW’s second-largest market after Europe, accounting for nearly 32% of sales in the first quarter of 2024.
“We do not believe our industry needs protection. Operating globally gives automotive manufacturers an industrial advantage. We could easily jeopardize this advantage by introducing tariffs,” warned Zipse.
German automakers fear that raising tariffs on imports of Chinese automobiles will prompt Beijing to take retaliatory measures against imports of European automobiles. Last month, the United States also raised tariffs on electric vehicles and other goods manufactured in China, accusing the Asian country of “overproduction” dumped at anti-competitive prices in markets worldwide.
