China retaliates against EU in escalating trade dispute

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【Summary】China and the EU are in a major dispute over potential tariffs on Chinese brands like BYD. The EU plans an anti-subsidy investigation to address the competition distortion caused by Chinese state support. China criticizes this move as a protectionist act and threatens retaliatory action, warning of negative consequences for China-EU trade relations. The EU's decision follows pressure from the automotive industry, while some, like Mercedes, argue that tariffs would be counterproductive.

FutureCar Staff Sep 15, 2023 6:17 AM PT

China retaliates against EU in escalating trade dispute

A major row is brewing between China and the EU over plans that could lead to the imposition of tariffs on companies like BYD. The EU is considering an 'anti-subsidy investigation' to support European manufacturers in competing with their Chinese counterparts, as reported by Car Dealer earlier this week.

Ursula von der Leyen, the president of the European Commission, expressed concern about the 'race to the bottom' caused by cut-price Asian brands benefiting from state support in China. She emphasized that while Europe welcomes competition, it does not want to see companies being undercut by cheaper alternatives.

The Chinese government has responded angrily to these comments and is threatening retaliatory action, according to The Times. China's ministry of commerce described the investigation as a "naked protectionist act" that would disrupt and distort the global automotive industry and supply chain, impacting China-EU economic and trade relations.

President von der Leyen's announcement came after pressure from the automotive industry, which has been struggling against the influx of new Chinese firms. Carlos Tavares, the boss of Stellantis, highlighted the challenges faced by European brands and called for political assistance.

However, not everyone agrees with the proposed tariffs. Mercedes believes that they would ultimately be counterproductive. Volker Treier, the head of trade at the German Chamber of Commerce and Industry, acknowledges the problem of Chinese competition distortion but suggests finding alternative solutions rather than resorting to excessive subsidies or punitive tariffs.