The European Commission wants to impose punitive tariffs on Chinese electric cars. Not the hefty 100 percent with which US President Joe Biden is intensifying the trade war with China started by Donald Trump, but at least 26 to 48 percent. That is not a good idea. It harms German car manufacturers in particular, but also European drivers, the necessary transport transition and thus the climate.
In the medium term, it will not cause any particular harm to China, but in the short term it will poison the atmosphere between the two economic superpowers. In addition, the tariffs are an expression of European double standards.
There is no doubt that the punitive tariffs are formally legal under the rules of the World Trade Organization (WTO). In China, the state subsidizes its car manufacturers, who produce too many cars and offer the surplus products (the situation is similar with solar cells) at dumping prices that local companies cannot keep up with.
On the other hand, China is also the most important market for German car companies. Mercedes, Volkswagen and BMW sell a good third of their cars in the People’s Republic. China is at the heart of his company’s business strategy, explained Mercedes CEO Ola Källenius on Chinese state television in July 2023. Yes, China is a “home beyond home” for Mercedes. This home is likely to become considerably colder if China, as threatened, imposes tariffs of between 15 and 25 percent on “large-engine” cars in response to the EU’s punitive tariffs.
Incidentally, the EU tariffs would also affect those European car manufacturers – especially the French – who produce cheap electric cars in China for re-import into Europe. Above all, however, drivers who are thinking about switching to electric cars would be deterred by higher prices.
And this is not even about the lack of charging infrastructure and the bureaucratic obstacles to setting up your own e-charging stations. In fact, it can be said that China’s taxpayers are subsidizing our energy transition with subsidies for e-cars, solar cells and the like. Think, for example, of balcony power plants that you can buy cheaply at the hardware store.
It is true that China is a system competitor. But we should not completely abandon the idea of change through trade. As a market, we are much more important to China than, for example, Russia, which would probably not be able to continue the war in Ukraine for long without China’s help. A trade war with China at this time deprives us of leverage that we could use to weaken the alliance between China and Russia a little – or to prevent China from attacking Taiwan.
In the end, the main problem is not the dumping price, but the price-performance ratio. Chinese electric cars offer more for the money, even if they are a bit more expensive. China is already building factories in Europe. The Chinese company BYD, main sponsor of this year’s European Football Championship, is building factories in Hungary and Spain and wants to become Europe’s largest manufacturer of electric cars by 2030. VW and Co. will have to come up with something.
And finally: We should be less self-righteous when it comes to subsidies. European farmers have been generously subsidized for decades and export the subsidized products to China. Just last April, German Agriculture Minister Cem Özdemir was in China to negotiate the export of apples, beef and pork from Germany to the People’s Republic.
France exports wine, cognac, cheese and other luxury products on a large scale; in short, China could hit Europe’s farmers hard if it reacts to our car tariffs with agricultural tariffs.
Other European products, from Airbus aircraft to cartoons, have been and are subsidized, such as nuclear, solar and wind energy. In an ideal world there would be no subsidies. In the real world all countries subsidize, and the USA does so on a large scale. The WTO has a forum for discussing state aid and punitive tariffs, with the aim of reducing both. This forum should be used.
