China considers tariff hikes on EU's gasoline cars and anti-dumping duties on Brandy as retaliation to European EV duties
Considering that Yu Yuan Tan Tian(玉渊谭天), a well-known state-operated channel with a history of exclusive access reserved for core Chinese media, had previously warned of Chinese countermeasures when the EU threatened trade restrictions on Chinese EVs, it would be surprised if it does not send some message to the EU after a preliminary decision to impose surprisingly high anti-subsidy duties to China by the European Commission.
As expected, on June 13, Yu Yuan Tan Tian made another warning.
According to Yu Yuan Tan Tian, the Chinese industry was “very dissatisfied and strongly urged relevant departments to take countermeasures against the EU” after the EU disclosed its preliminary decision. It then reviewed the history of this trade dispute and the EU's investigation into Chinese EVs, citing Sun Xiaohong(孙晓红), Secretary-General of the Automotive Internationalization Committee of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, and Hao Jie(郝洁), a researcher at the Institute of Foreign Economic Research of the National Development and Reform Commission. Their comments explained why the opposition from the Chinese industry is so strong. According to Yu Yuan Tan Tian, Chinese EVs were requested to submit their business secrets to the EU during the investigation.
The strong opposition from the Chinese industry has clear and sufficient legal grounds. Reviewing the so-called investigation by the EU, from the initiation to the investigation process and the preliminary decision, one word stands out:
Unreasonable.
Let's break it down step by step.
First, the initiation. This anti-subsidy investigation was initiated by the European Commission itself, rather than by relevant industries within the EU.
What’s the difference between an industry-initiated and a Commission-initiated investigation?
The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) is the industry respondent in this investigation. Sun Xiaohong, the Secretary-General of the CCCME's Automotive Internationalization Committee, is very familiar with the situation. He stated that anti-subsidy investigations are typically initiated by industry applications because only the industry directly feels the threat from a country’s highly competitive products and requests an investigation based on substantial support.
And what was the European Commission's reason for initiating this investigation? It was their subjective judgment that China's electric vehicle industry poses a "threat."
Sun Xiaohong pointed out that historically, the European Commission has almost never initiated an anti-subsidy investigation on its own.
During the subsequent investigation process, there were also many unreasonable aspects.
The CCCME described the investigation with three words: lack of fairness, objectivity, and transparency.
First, the sampling was unfair.
The European Commission selected three companies: SAIC, Geely, and BYD. The Commission did not provide convincing reasons for why these three companies were chosen.
Hao Jie, a researcher at the Institute of Foreign Economic Research of the National Development and Reform Commission, stated that to achieve their preset goals, the European Commission constructed and exaggerated so-called "subsidy" items, disregarding WTO rules, and abandoning the largest export volume representativeness standard. They excluded major exporters from Europe and the US in their sampling and only selected Chinese local enterprises. The sampling standards were non-compliant, the process was opaque, and the results were unjust.
Statistics show that Chinese brands hold about 8% of the electric vehicle market in Europe, and the proportion represented by these three companies is even smaller.
Where does the European Commission's "threat" come from? We do not know.
Faced with this "threat," the European Commission demanded extremely stringent information from Chinese electric vehicle companies.
More than 200 affiliated companies of the three sampled Chinese companies were required to submit questionnaires and respond to over 100 supplementary questionnaires, cooperating with the European Commission in months-long on-site verifications. Both the time and the number of investigation samples were unprecedented in Sun Xiaohong's experience.
From the preliminary disclosure, the tax rates imposed on the three Chinese car companies range from 17.4% to 38.1%, with a wide disparity, yet the European Commission has not provided an explanation.
Sun Xiaohong told Tan Zhu that Chinese companies reported that the EU demanded they provide battery formulas during the investigation.
According to him, the European Commission requested a lot of information from Chinese companies that involved corporate privacy, trade secrets, and core technologies.
These are the core competitive strengths of China's electric vehicle industry. Is the European Commission trying to obtain them by force because they can't compete?
Sun Xiaohong stated that what is even more opaque and unreasonable is that the EU used self-collected data to supplement the information they could not obtain from the companies, regardless of whether this data was objective or truthful.
Throughout the investigation, the European Commission never substantively responded to China's counter-arguments.
Sun Xiaohong said that during multiple rounds of investigations and hearings, the EU never considered China's positions and concerns. They seemed uninterested in dialogue, focusing solely on completing their investigation as they intended.
Facing such an investigation, China has described it with one phrase:
Naked protectionism, manufacturing and escalating trade friction, under the guise of "maintaining fair competition," but actually "destroying fair competition," which is the greatest "unfairness."
Faced with such actions, China must take measures and counteract.
Citing "industry insiders," Yu Yuan Tan Tian revealed that China is “internally advancing procedures to raise provisional tariffs on large-displacement gasoline vehicle imports”.
Large-displacement cars refer to gasoline vehicles with an engine displacement greater than 2.5 liters. Recently, Chinese automotive industry insiders have been calling for higher provisional tariffs on the import of large-displacement cars to promote the "dual carbon" goals.
The China Passenger Car Association specifically calculated that the total value of passenger cars with a displacement of over 2.5 liters exported from Europe to China annually has reached $18 billion. This number is higher than the value of Chinese electric vehicles exported to Europe in 2023.
If China raises the temporary tariff rate, European brands like BMW and Mercedes-Benz will be the first to be impacted, which means European car exports to China will suffer.
Cui Fan, an international trade expert at the University of International Business and Economics, told Tan Zhu that the industry is calling for China to increase the import tariff on large-displacement cars to 25%. If China takes such action, it would be within the commitments China has made to the World Trade Organization and would fully comply with WTO rules.
Yu Yuan Tan Tian then quoted another "expert familiar with the brandy anti-dumping investigation," stating that “the anti-dumping investigation on brandy imports from the EU initiated by China’s MOFCOM earlier this year is expected to be announced preliminary results by the end of August.”
In addition to the automotive industry, Tan Zhu learned that China is expected to announce the preliminary results of the anti-dumping investigation on brandy imports from the EU by the end of August.
Last year, the China Alcoholic Drinks Association formally submitted an anti-dumping investigation request to the Ministry of Commerce on behalf of the domestic brandy industry, and the Ministry launched the investigation in January this year.
One statistic highlights the importance of the Chinese market to the European brandy industry:
Customs data show that while sales of European brandy have significantly declined in other global markets, the Chinese market has become crucial in supporting their sales. From January to September last year, EU brandy exports to China increased by more than one-fifth year-on-year.
Yu Yuan Tan Tian also pointed out that there are differing opinions within EU member states regarding the imposition of anti-subsidy duties, with European car companies that have business ties with China voicing strong opposition. Citing Zhang Monan(张茉楠), an expert from the China Center for International Economic Exchanges who recently returned from a European visit, she said that European countries are very concerned about China's countermeasures. Until the provisional tariffs start on July 4, Chinese companies and EU member states can still raise objections. If most EU countries oppose the tariffs, the anti-subsidy duties will not be enforced. The EU still has an opportunity to correct its mistakes and make amends.
One noteworthy detail is that after the European Commission announced its decision to impose provisional anti-subsidy duties on electric vehicles imported from China, Germany, Hungary, and Sweden were among the first to express their opposition.
These countries are precisely the ones at the forefront of cooperation with China in the field of new energy vehicles within the EU.
Clues about what actions would benefit these countries can be seen in the statements made by Oliver Zipse, Chairman of BMW Group.
Zipse indicated that imposing tariffs would hinder the development of European car companies and harm Europe's own interests. Trade protectionism is bound to trigger a chain reaction—tariffs in response to tariffs, isolation replacing cooperation.
The concern of European car companies about the European Commission's decision to impose tariffs has an important context:
Wei Qijia(魏琪嘉), a researcher at the National Information Center of the National Development and Reform Commission, pointed out that in recent years, EU companies such as BMW, Volkswagen, and Faurecia have continuously increased their investment in new energy vehicle businesses in China, obtaining key technologies such as batteries and smart systems. Chinese companies like CATL, NIO, and BYD have also established factories in Germany and Hungary, helping to enhance the competitiveness of the EU's electric vehicle industry.
In the era of globalization, leveraging comparative advantages is essential for countries to achieve better development. While there is competition between the Chinese and European automotive industries, there is even more cooperation.
Yu Yuan Tan Tian noted that the EU's measure would also undermine Europe's efforts to combat climate change and achieve economic green transformation. Citing European media's own comments, it highlighted the “absurdity” of the EU urging consumers to switch to electric vehicles while simultaneously trying to block the supply of cost-effective electric vehicles.
The win-win cooperation extends beyond the automotive industry. Strengthening collaboration with China in the field of new energy vehicles also benefits Europe in tackling climate change and achieving economic green transformation.
According to data from Transport & Environment, in 2023, 19.5% (about 300,000 units) of the electric vehicles sold in Europe were made in China. With each electric vehicle reducing carbon emissions by approximately 1.66 tons per year, this amounts to an annual reduction of 498,000 tons of carbon.
The EU has always prided itself as a "pioneer" in the global green transition. The European Commission's decision to impose tariffs on Chinese electric vehicles will not only hinder its automotive industry's transition but also damage its image as a leader in the green transition.
In fact, even European media have pointed out the irony of the EU urging consumers to switch to electric vehicles while simultaneously trying to block the supply of cost-effective electric vehicles, calling this move absurd and laughable.
Yu Yuan Tan Tian concluded the report by saying that “choosing between a win-win situation or mutual harm is something the EU still has time to consider.” , and the following picture text reads: “China will closely monitor the subsequent developments from the EU and will resolutely take necessary measures to firmly defend the legitimate rights and interests of Chinese enterprises.”
