In any case, Europeans, Americans and Japanese acted against China’s unfair trade practices. Beijing is being pushed badly.
Explanation
While Trump administration’s tariffs and Beijing’s response to them have headlines, China has also had to respond to Europe’s suppression of trade.
A few months ago, the European Union placed high tariffs on Chinese-made electric vehicles (EVs), claiming that China subsidizes production and has unfair trade benefits. In the past few weeks, Beijing has responded. It has brought about normal complaints and threats, but Beijing has shown much more restraint than it had in the past. For China’s rather vulnerable domestic economy, it should provide a weak basis for pursuing an aggressive trade war with Americans, Japanese and now Europeans.
EU administrators began action late last year. European domestic car manufacturers have resorted to flooding of cheap Chinese-made EVs flowing through the continent. Officials in Brussels have investigated and decided that the flood of EV imports is not only preying on the sale of domestically-made products, but also hindering the development of European EV capabilities.
Under the authority of what the EU calls “foreign subsidies regulations,” Brussels determined that Beijing is actually subsidizing EV production. In response, the EU has increased the mandatory obligations for these cars from 3.5% to almost 30%. Around this time, Brussels has also launched probes on Chinese trains, solar panels and security equipment, and has not imposed tariffs on these products, but is implicitly threatening them.
Chinese EV makers filed a lawsuit challenging tariffs in Europe, and Beijing issued an official response, launching its own probe on European products that enter China among brandy, pork and luxury cars. It imposes what is mentioned as temporary customs duties on brandy imports.
Related Stories
China’s Ministry of Commerce recently released a 20-page document summarizing the findings. It highlighted the burden placed on the Chinese companies involved, including extensive demands for information and surprise testing. Several Chinese companies said they had to withdraw from the projects they had contracted and suffered losses of around 15.6 billion yuan (approximately $2.1 billion). The ministry accused Europeans of failing to properly define “foreign subsidies” or “market distortions” in the charges. Europeans responded by promoting the integrity of the law and how the situation required information and inspection requests.
Despite the grumpy tone of the Commerce Ministry report, Beijing has so far kept its response significantly restrained. In the past, we may have seen bold threats of retaliation and the submission of cases at the World Trade Organization and other international organizations. But none of this happened – at least not yet. Beijing complains, tariffs on European brandy do little to constitute a proportional response to EU tariffs on China’s EVs coming to the 27 member states.
China has shown similar moderation as the increase in tariffs imposed by the US on a wide range of Chinese products. Beijing collects 10-15% tariffs on American coal, liquefied natural gas (LNG), crude oil, pickup trucks, agricultural machinery, some produce and large-scale engine vehicles, which impacts only $35 billion in US exports, and US Tarif equals $52.5 billion in exports.
Given the current situation, Beijing could take a more cautious approach. If the US is the most aggressive, Chinese authorities know that offensive tactics could lead to more hostility from other parts of the developed world. The Chinese Communist Party (CCP) also recognizes that its vulnerable domestic economy is not ready to engage in a trade war with much of the world.
The views expressed in this article are the views of the authors and do not necessarily reflect those of the epoch era.
