China wants EU to remove tariffs on EVs by July 4 as talks resume

FILE PHOTO: Flags of European Union and China are pictured during the China-EU summit at the Great Hall of the People in Beijing, China, July 12, 2016. REUTERS/Jason Lee/File Photo

By Joe Cash and Ryan Woo

BEIJING (Reuters) -Beijing wants the EU to scrap its preliminary tariffs on Chinese electric vehicles by July 4, China's state-controlled Global Times reported, after both sides agreed to hold new trade talks.

Provisional European Union duties of up to 38.1% on imported Chinese-made EVs are set to kick in by July 4 while the bloc investigates what it says are excessive and unfair subsidies.

China has repeatedly called on the EU to cancel its tariffs, expressing a willingness to negotiate. Beijing does not want to be embroiled in another tariff war, still stung by U.S. tariffs on its goods imposed by the Trump administration, but says it would take all steps to protect Chinese firms should one happen.

Both sides agreed to restart talks after a call between EU Commissioner Valdis Dombrovskis and China's Commerce Minister on Saturday during a visit to China by Germany's economy minister, who said the doors for discussion are "open".

"EVP Dombrovskis and China's Commerce Minister Wang Wentao had a candid and constructive call on Saturday on the EU's anti-subsidy investigation into battery electric vehicles produced in China," a European Commission spokesperson said.

"The EU side emphasised that any negotiated outcome to its investigation must be effective in addressing the injurious subsidisation," they added.

China's Global Times, citing observers, said the best outcome is that the EU scraps its tariff decision before July 4.

It said increasingly protectionist moves by the EU will trigger countermeasures and an escalation in trade frictions would only lead to "lose-lose" results for both sides.

The tariffs are set to be finalised on Nov. 2 at the end of the EU anti-subsidy investigation.

China's commerce ministry did not immediately respond to a Reuters request for comment.

TRADE WAR?

EU trade policy has turned increasingly protective over concerns that China's production-focused development model could see it flooded with cheap goods as Chinese firms look to step up exports amid weak domestic demand.

China has rejected accusations of unfair subsidies or that it has an overcapacity problem, saying the development of its EV industry has been the result of advantages in technology, market and industry supply chains.

"When European Commission President Von der Leyen announced she would investigate China's new energy vehicles... I had an intuitive feeling it was not only an economic issue but also a geopolitical issue," said Zhang Yansheng, chief research fellow at the China Center for International Economic Exchanges.

"I think it is unfair to start a tariff war by only taking into consideration the capacity utilisation rate and insufficient demand," he added.

Trade relations between the 27-strong bloc and the world's No. 2 economy took an abrupt turn for the worse in May 2021 when the European Parliament voted to freeze ratification of what would have been a landmark investment treaty because of tit-for-tat sanctions over allegations of human rights abuses in China's Xinjiang region.

They came to blows again that year when China downgraded diplomatic ties with Lithuania and told multinationals to sever relations with the Baltic state after Vilnius invited democratically governed Taiwan, which China claims as part of its territory, to open a representative office in the capital.

ARMED AND READY

Although calling for talks, Beijing has also indicated that it has retaliatory measures ready if the EU does not back down, and that it considers Brussels wholly responsible for the escalating tensions.

The Global Times, which first reported China was considering opening a tit-for-tat anti-dumping investigation into European pork imports - which the commerce ministry confirmed last week - has also teed up an anti-subsidy investigation into European dairy goods and tariffs on large-engined petrol cars.

Chinese authorities have dropped hints about possible retaliatory measures through state media commentaries and interviews with industry figures.

"It seems probable that Beijing will raise tariffs up to 25% for Europe-made cars with 2.5 or above litre engines," said Jacob Gunter, lead analyst at Berlin-based China studies institute MERICS.

"Pork and dairy are already on the table for Beijing, and likely more agricultural products will be threatened," he added.

"On the EU side, there are a variety of ongoing investigations ... so we should expect some sort of measures targeting distortions on (Chinese) products ranging from medical devices to airport security scanners to steel pipes."

(Reporting by Joe Cash and Ryan Woo; Editing by Gerry Doyle and Alexander Smith)