Between Beijing and Brussels, with the taxation of Chinese electric vehicles, the trade war is declared

Germany sees red, France applauds. On Friday October 4, European Union (EU) member states gave the green light to the European Commission’s proposal to impose countervailing duties on imports of battery electric vehicles from China. Because the European executive is convinced: we must restore global competition by imposing customs duties on Chinese manufacturers who benefit from a slew of state aid, across the entire production chain of electric cars.

But some states – Germany in the lead – were reluctant to move forward, fearing retaliatory measures from China. And for good reason, Beijing is conducting its own “anti-subsidy” investigations with an iron fist in the spirits, pork and dairy products sectors. Germany therefore voted against the Commission’s plans – along with Slovakia, Slovenia and Malta. France was in the pro camp. And other countries abstained. But the qualified majority which could have blocked the passage of the text was not found.

Result: rates that make Berlin dizzy will be applied to certain companies (17% for BYD, 18.8% for Geely, 35.5% for SAIC, 7.8% for cars from the American company Tesla which are exported from China… and 35.3% for companies which did not cooperate with the Commission’s investigation. These rates are in addition to that of 10% already in place.

“Signal fatal” pour BMW

The Commission’s “implementing regulation”, which lists these percentages, will be published in the Official Journal of the EU by the end of October at the latest. After the vote, German Finance Minister Christian Lindner immediately called on the Commission to avoid triggering a “trade war” with Beijing. But it already seems to be well and truly underway.

According to the leading European automobile group, the German manufacturer Volkswagen, this green light is the “wrong approach” to improve the “competitiveness of the European automobile industry”. For its competitor BMW, this vote “is a fatal signal for the European automobile industry” and “a commercial conflict in which no one has to gain” must be avoided at all costs.

In mid-September, the Executive Vice-President of the Commission and Commissioner responsible for Trade Valdis Dombrovskis nevertheless tried to play the conciliation card, receiving Chinese Trade Minister Wang Wentao in Brussels. In vain. The solutions proposed were not convincing. In this final stretch, the European executive still says it is “working hard to find an alternative solution which should be fully compatible with WTO rules, making it possible to remedy the harmful subsidization established by the ‘investigation of the Commission, and be verifiable and enforceable’.