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EU Commission President Ursula von der Leyen has threatened China with defensive trade measures due to its market distortion.
“We will defend our companies, we will defend our economy. We will never hesitate to do so if necessary,” she said after a meeting Xi Jinping.
“Europe cannot accept market-distorting practices that could lead to deindustrialization here at home.”
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CEO of Volkswagen Brand Thomas Schäfer expects China to retaliate against tariffs expected to be imposed by the European Commission.
“I don’t believe in tariffs. I want everybody to compete on the same terms.” “There is always some sort of retaliation,” he told Financial times.
“It’s a tough market. You need to be on your toes but we are big enough, important enough for China and localised enough in China so there is no reason why we can’t follow the speed,” Schäfer said.
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Volkswagen CFO Arno Antlitz said EU tariffs will only provide a short-term respite given that Chinese automakers plan to produce in Europe and that the only long-term solution is to reduce costs.
“It is very questionable whether the current tariff discussion leads into the right direction,” he said in a LinkedIn post. “We have to use the next two to three years to become even more competitive on the cost side.”
Main Article: Trade Tariffs - InvestmentWiki
There are the tariffs Biden proposed on May 14.
The products affected only represent about 18B in total imports, which is a very small fraction of the 427B total imports from China in 2023. Hence, the current consequences on the broader economy are going to be very minimal.
The consequences are more specific to the particular industries where the imports from China represented a significant fraction of the total.
China’s retaliation is expected to come but is not expected to be overly aggressive, but only as a response. These could be some of the options:
China’s Chamber of Commerce already issue an statement that China is considering increasing tariffs for vehicles with larger than 2.5 liters engines due to the US and EU recent actions
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Effective from July 4, 2024- unless there will be an agreement with Chinese Authorities, the EU commission will impose additional tariffs of up to 38.1% on BEVs shipped from China.
BEV producers that cooperated with the authority during its investigation but have not been “sampled” will be slapped with a tariff of 21% while those that did not comply will be struck with 38.1%.
The authority will impose a tariff of 17.4% on BYD, 20% on Geely and 38.1% on SAIC.
“The commission has provisionally concluded that the battery electric vehicles (BEV) value chain in China benefits from unfair subsidisation, which is causing a threat of economic injury to EU BEV producers,” the commission’s statement reads.
The current import duty on Chinese automakers is 10%.
The Chinese government already vowed to retaliate against such tariffs.
The fear of retaliation made European car makers’ stock to decline. Volkswagen, Porsche, Mercedes and BMW shed 1.6%, 6%, 1.5% and 1.7%, respectively.
A post was merged into an existing topic: Automotive Industry: Europe
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Bloomberg: China Floats Perks for German Carmakers in Bid to Stop EV Levies
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EU Commission confirms its preliminary tariffs on Chinese BEVs as talks continue
Government support for Chinese EV automakers has been declining
The Chinese EV Dilemma: Subsidized Yet Striking | Trustee China Hand | CSIS
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Chinese-Europe joint ventures may be eligible for reduced tariff rates, EU says
A post was merged into an existing topic: Impact of Trade Tariffs on Volkswagen
China trade ministry criticizes the EU adjusted tariffs
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European parliament adopts the tariffs on Chinese EVs
The European Union voted to adopt the tariffs imposed on Chinese EVs by the EU Commission.
The EU pointed out that they will continue to work for alternative solutions as the tariffs are adopted.
“In parallel, the EU and China continue to work hard to explore an alternative solution that would have to be fully WTO-compatible, adequate in addressing the injurious subsidization established by the Commission’s investigation, monitorable and enforceable,” it said.
https://ec.europa.eu/commission/presscorner/detail/de/statement_24_5041
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Trump vows to impose additional 10% tariff on Chinese goods and 25% tariff on goods imported from Canada and Mexico, a rollback from earlier promise
Donald Trump said he will impose an additional tariff of 10% on Chinese goods and 25% on goods imported from Mexico and Canada once he takes office.
“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” he said in a post on Truth Social.
Trump had said during campaigns that he will impose additional 60% tariff on Chinese goods and 100% tariff on goods imported from Mexico. He had also promised to impose a 10% tariff on goods imported from Europe.
Shares in European automakers reacted negatively to Trump’s pledges. Volkswagen shed more than 2.1%.
Assessment
Trump’s new vows one month before taking office indicates that he was serious about the tariffs. However, the fact that he has rollback on China and Mexico tariffs could signal that his new tariff for Europe will be much less.
According to data from Mexico’s statistics agency, US automakers will be mostly impacted by Trump’s tariff. Therefore, I agree with analysts that Trump is not looking to impose the tariffs but rather using them as leverage to obtain some political benefits.
I made this post recently and came to the same conclusion that he is most likely
using them as a negotiation tool. The negative consequences on the economy in the current environment are significant for him to risk it in my opinion. (inflation still above 2%, rates are high, valuations are very high, yields going up even with rate cuts, huge fiscal debt and deficits)
We probably could expect some tariffs eventually, especially in sectors like autos and China, but I think the proposed ones are very aggressive to not hurt the US economy. These are the 3 biggest trade partners, and a lot of the supply chains are extremely integrated with Mexico and Canada especially.
I was listening to experts that sometimes inputs cross the border 7/8 times until the final product, and a lot of important inputs for the economy eg. energy are one of the most affected.
And also that the tariffs implemented during the last Trump administration have been found to be a net negative on the economy. While certain industries benefited, many others faced higher input costs and reduced exports due to retaliatory tariffs, ultimately more than offsetting the gains in growth and job gains. These effects would be much bigger now that Mexico and Canada are also involved.
At the same time this is Trump we are talking about, so I don’t think this is an empty threat either, but just that he is looking for negotiations first.
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Trump is considering declaring a national economic emergency to provide justification for imposing import tariffs on a large scale
