China Threatens 25% Car Tariff Against US, EU Moves – Trade Ties To Worsen In Coming Weeks

Beijing is still mulling its expected retaliation in the wake of last week’s Biden administration rollout of steep tariff increases on a series of Chinese tech imports, importantly including computer chips, EV batteries and medical technology products.

Wednesday saw shares of European luxury automakers such as BMW, Mercedes-Benz, Tata Motors (Jaguar Land Rover), and Volkswagen Group (Audi) all finish lower, in the aftermath of a threatening and ominous Chinese state-run Global Times article which argued China should „consider raising the temporary tariff rate on imported cars with large-displacement engines, in order to reduce imports as part of the country’s broader efforts to cut emissions and promote the green development of the auto industry.”

China has signaled it is ready to unleash tariffs as high as 25% – which would be a significant increase up from the current duty rate of 15%. Citing a Chinse industry insider, the GT piece blasted the 'protectionist moves’ coming out of Washington and the West.

Chinese state owned SAIC Motor

Separately this week, in post on X, the China Chamber of Commerce to the EU (CCCEU) issued its own warning in an obviously coordinated messaging campaign, saying it was „informed by insiders that China may consider increasing temporary tariff rates on imported cars equipped with large-displacement engines.”

„This potential action carries implications for European and US carmakers, particularly in light of recent developments such as Washington’s announcement of tariff hikes on Chinese electric vehicles and Brussels’ preparations for preliminary measures in a high-profile anti-subsidy investigation into Chinese EVs,” the chamber statement said.

As a reminder, this the text of the European Commission’s opening an investigation back in October… it formally launched „an anti-subsidy investigation into the imports of battery electric vehicles (BEV) from China. The investigation will first determine whether BEV value chains in China benefit from illegal subsidisation and whether this subsidisation causes or threatens to cause economic injury to EU BEV producers.”

The investigation under EC President Ursula von der Leyen aims to determine whether this violates the WTO anti-dumping agreement. The deadlines set out to potentially impose duties is July 4.

China is hitting back at both Europe and the US, as South China Morning Post observed:

Beijing has indicated that it won’t take either gambit lying down. On Sunday, the Chinese Ministry of Commerce announced an anti-dumping investigation into imports of polyoxymethylene copolymer – a chemical commonly used in automotive engineering – from the US, EU, Japan and Taiwan.

It has already started probing alleged dumping in the European brandy sector, seen to target France’s cognac exports. Paris has been a strong supporter of a tougher EU trade policy towards China.

Amid predictions that trade conditions between China and the West are expected to worsen in the coming weeks, von der Leyen on Tuesday sought to downplay a trade war in remarks from Brussels.

„I don’t think that we are in a trade war. I have the motto: 'de-risk not decouple’, and I think here it’s very clear we are in the category of de-risking from China. We have decoupled from Russia,” she said.

China is set to be a central foreign policy talking point among both presidential campaigns going into November…

In a big „cognitive dissonance” moment, Rand Paul correctly points out there’s „not a lot of difference” between Biden and Trump on China, especially since Biden „jumped on the Trump Train” with respect to Tariffs. Both are obsessed with scolding and sanctioning China, Paul notes pic.twitter.com/ugqgjUT5nB

— Michael Tracey (@mtracey) May 21, 2024

And here’s what the Biden administration said during the last Tuesday unveiling of the new US tariff hike: „Today, I am following through on my commitment to stand up to the People’s Republic of China’s unfair trade practices by issuing a formal proposal to modify the tariff actions.” US Trade Representative Katherine Tai further vowed, „The President and I will continue to fight for American workers, and for our economic future and national security.”