The Biden administration just raised U.S. tariffs on Chinese vehicles, but international coordination is critical to countering China’s overcapacity.
The European Union is expected to decide as soon as this week whether to place tariffs on imports of passenger vehicles from China, a significant move that will help in the larger effort to mitigate massive overcapacity in the sector.
We’ve been warning for months that allowing Chinese imports to penetrate the U.S. market will lead to an “extinction-level event” for the U.S. auto industry, as Chinese autos are priced absurdly low thanks to the heavy subsidization of China’s government. We aren’t the only ones sounding the alarm, and it appears the White House has taken notice — the Biden administration announced in May it will raise tariffs on Chinese auto imports to 100%.
But while tariffs have thus far been enough to keep Chinese imports out of the U.S. market — although Volvo is set to introduce one this year — that hasn’t been the case in most places around the world. Chinese auto imports are flooding the market in places like South America, Mexico, Southeast Asia, and Australia. Now Chinese automakers have their sights set on Europe, and it’s already causing plenty of problems.
Now the EU may be ready to start fight back. Last year, the European Commission launched an investigation into Chinese auto imports, and its findings are set to be revealed as soon as Wednesday, potentially leading to tariffs placed on Chinese auto imports.
The BBC reported that it “is widely expected that the Commission will provisionally raise duties on EVs imported from China, from the standard level of 10% for third country imports to between 20 and 25%.”
While those margins aren’t as high as the ones about to go into place in the United States, it does represent progress in a larger, global effort to counter China’s massive overcapacity. China produces far more vehicles than it needs, but as the Wall Street Journal reported, China’s government “continues to support companies such as Zhido and others, encouraging unprofitable carmakers to keep producing as officials try to boost economic growth, preserve jobs and expand China’s role in the global electric-vehicle business.”
Countries issuing individual tariffs merely serve as a band-aid for a much larger wound. While Chinese imports haven’t yet entered the U.S. market, the threat remains because China continues to find it beneficial to churn out vehicles, price them absurdly low, and dump them into other countries’ markets. The only way China is likely to stop is if enough countries coordinate their response and make it unprofitable for China to keep doing it.
Given that the U.S. and EU are among the two biggest markets in the world, both issuing tariffs seems like a step forward in the overall effort to counter Chinese overcapacity.
But even at this late hour, it isn’t a given that tariffs will be issued. Politico Pro reported Tuesday afternoon that Germany has launched an 11th hour bid to halt the tariffs, while France is leading the charge to raise them.
“With a decision by the European Commission imminent, both Paris and Berlin have ramped up their lobbying efforts — with conflicting messages on just how tough Ursula von der Leyen’s executive should get on Beijing,” Politico reported. “The EU executive is expected to inform Chinese EV-makers on Wednesday of temporary duties resulting from its probe into unfair state subsidies. EU member countries would then vote this fall to confirm the duties — making it vital for von der Leyen to pitch them at a level that the bloc’s two heavyweights can live with.”
Driving Germany’s hesitance is likely the fact that its automakers have a heavy presence in China, as “BMW, Audi and Mercedes-Benz have sold 19.2 million cars in China, making up 30 to 40 percent of each automaker’s global sales,” according to Politico. But France is fighting for higher tariffs.
“Paris lobbied hard for the probe, which was announced by von der Leyen in her set-piece annual address last fall,” Politico reported. “And, despite Beijing’s threat to hit back at French cognac makers in an anti-dumping investigation, Paris wants much higher duties on Chinese EVs.”
We’ll keep a close eye on what the EU announces this week, and what happens in the coming months.
Click this link for the original source of this article.
Author: Elizabeth Bunch
This content is courtesy of, and owned and copyrighted by, https://www.americanmanufacturing.org and its author. This content is made available by use of the public RSS feed offered by the host site and is used for educational purposes only. If you are the author or represent the host site and would like this content removed now and in the future, please contact USSANews.com using the email address in the Contact page found in the website menu.