"Against Germany's voice, the EU has now decided on punitive tariffs against China. There are various reasons and future prospects behind this.
When will the tariffs come?
The tariffs are to apply for five years from October 31st. They will be levied in addition to the standard rate of 10 percent. They are intended to compensate for the disadvantages that companies in the EU have because China grants high subsidies to manufacturers in its own country. The tariff rates vary depending on the manufacturer and the aid received. The US manufacturer Tesla has to pay 7.8 percent for its electric cars produced in China, BYD 17.0 percent, Geely 18.8 percent. The maximum rate that applies to SAIC and all other companies not cooperating with the EU will be 35.3 percent. Joint ventures with European participation have to pay 20.7 percent. This applies to the Cupra Tavascan from VW and the electric Mini Cooper from BMW.
Are the Can tariffs still be avoided?
Formally yes. Strictly speaking, they have not even been decided yet. For that to happen, a majority of member states would have had to vote in favor of the tariffs. That is not the case. In addition to Germany, four states voted against: Hungary, Slovakia, Slovenia and Malta. Twelve others abstained. Only ten, including France, Italy and the Netherlands, voted in favor. But the way is still clear for the tariffs. The EU Commission can now decide freely and is unlikely to oppose its own proposal. In order to stop it, there would have had to be a clear majority (15 states representing more than 65 percent of the EU population) against the tariffs.
Are the negotiations continuing?
The Commission and Beijing emphasized on Friday that the negotiations were continuing. From the EU's point of view, any agreement must ensure that the damage caused to European manufacturers by Chinese subsidies is fully compensated. So far, Chinese manufacturers have offered minimum prices and also to limit the number of cars imported into the EU. But that was not enough for the Commission.
Is a trade war now beginning?
Despite the negotiations, it is unclear how China will react. However, the government in Beijing has already initiated a series of trade proceedings against EU products that are clearly to be understood as a reaction to the car tariffs. They are aimed at cognac, dairy products, pork and - particularly important for Germany - cars with large combustion engines.
What consequences are threatening car customers?
Hopes for a rapid expansion of the range of cheap electric cars have been dampened. Chinese suppliers who now want to start selling on the European market have to recalculate their prices. There have been few cheap offers so far because the Chinese car companies are trying to start in the upper segment. The market launch of cheaper electric cars from China could be delayed. At the same time, European companies are producing electric cars for the European market in China, such as BMW's electric Mini and the BMW iX3 or VW's mid-range SUV Cupra Tavascan. These cars could become more expensive or be eliminated from the range.
What does this mean for the German industry?
The German car companies fear falling victim to Chinese countermeasures. They are the only ones in the EU with a significant presence on the Chinese car market, which is the largest car market in the world with 40 percent of all international car registrations. The German companies produce for China in China on the one hand, but also focus on production for the entire global market. BMW and Mercedes produce expensive SUVs in the USA, expensive luxury sedans and sports cars in Germany. It is important for both locations that the products can also be exported to China, because it makes little sense to set up their own production for these cars on every continent. At the same time, companies such as BMW and Volkswagen are using the large Chinese electric car market to produce niche models in larger quantities in China and thus enrich the range in Europe at the same time. Bringing these models to Europe could now become unprofitable. The EU Commission is reacting calmly to these concerns. She argues that the tariffs are not about protecting individual manufacturers, but rather production in the EU.
How did the German manufacturers react?
The Association of the Automotive Industry (VDA) praises Germany's "no". "It is a correct signal from the Federal Government, which has stood behind the interests of the European and German automotive industry and its employees - in the interests of the economy, prosperity and growth," stressed VDA President Hildegard Müller. The potential damage that could result from countervailing tariffs is greater than the possible benefit of the instrument. Increasing market isolation is not an option for the European automotive industry. BMW boss Oliver Zipse spoke of a "fatal signal".
Why is the car nation France different from Germany in favor of tariffs?
The French car companies Stellantis and Renault failed with their strategies for the Chinese market and were for a long time among the drivers of punitive tariffs because they had little to fear from China's countermeasures against European car manufacturers. Conversely, Chinese punitive tariffs against European car companies would weaken German competitors. This position in favor of punitive tariffs is now being pursued by the government in Paris. The Stellantis Group has just allied itself with China's Leapmotor and now has a more differentiated position. France's government continues to fear Chinese low-cost suppliers because domestic producers tend to be active in the lower and middle price segments. Italy regrets that its own car production has experienced a decline and that with the merger of Fiat-Chrysler with Peugeot-Citroen to form Stellantis, there is no longer an auto company headquarters in the country. It is therefore hoped that the Chinese will now build car factories behind the European customs walls within Europe and could also choose locations in Italy.
Are the EU's climate targets in danger?
The EU is already having difficulties increasing the number of electric cars as intended. From 2035 onwards, new cars with combustion engines will be banned. If electric cars become more expensive or supply becomes scarcer, this will tend to slow down the expansion of electromobility.
How high is the Chinese market share in this country?
Only the Chinese state-owned company SAIC is listed by name in the EU registration statistics, with a market share of 1.4 percent in the period from January to August 2024. All other brands with a market share of less than 0.4 percent are not mentioned. The Chinese are a little stronger in the market for battery-electric cars. In Germany, the share of purely electric cars in the overall market was 12.6 percent from January to August. Within this market segment, the share of Chinese suppliers was 6.6 percent, of e-cars produced in China by European brands of the Chinese Geely Group (Volvo, Polestar, Smart) 6.5 percent, and of e-cars made in China by European brands 4 percent.
What does this have to do with the USA?
The USA has imposed tariffs of 100 percent on e-cars from China. The share of Chinese manufacturers in the American market is even lower than in the EU. However, the EU Commission fears that the American decision will lead to China concentrating even more on the European market.
What do economists say?
In the case of China, the image that economists are fundamentally in favor of free trade is wavering. In the F.A.Z. economists' panel and the Ifo Institute, half of the 162 participating economists supported the countervailing tariffs a few weeks ago. Only a third rejected them. The economists cited the fact that China distorts competition with its large subsidies as the reason for the tariffs. More than half of the economists in this survey, however, rejected the idea of the EU responding to Chinese subsidyitis with its own subsidies."
What does this mean for Lithuania?
Lithuania became a little appendix to Germany. French and Italian gang is trying to kill Germany. The little appendix might be dead soon too.
https://www.faz.net/aktuell/wirtschaft/eu-zoelle-auf-chinesische-autos-was-sind-die-folgen-110027146.html
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