EU under pressure after US imposes import duties on Chinese goods

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New U.S. tariffs on Chinese goods will shift shipments to Europe and increase pressure on Brussels, which is straining not to get caught up in the trade war between Washington and Beijing.

President Joe Biden on Tuesday imposed 100 percent tariffs on Chinese electric vehicles and tripled tariffs on steel and aluminum. He increased tariffs on solar cells to 50 percent and said tariffs on semiconductors would be doubled from 2025.

“The US has sent a very clear message that it wants minimal Chinese participation in the green transition,” said Yanmei Xie, geopolitical analyst at Gavekal Research. “The EU, the remaining major developed market with green ambitions and generous subsidies, will be an indispensable market for Chinese exporters of clean energy products.”

The US move came as the European Commission struggles to protect domestic green technology industries from low-cost Chinese competitors, with EU officials emphasizing that Brussels does not have the power to compete with Washington and Beijing in a global trade war.

They predicted that the US measures were likely to widen an already uncomfortably large European trade deficit with China – €290 billion by 2023, and that Brussels was actively looking to use its available “powers” ​​to address that imbalance.

“The EU cannot remain silent as it will be the main target for Chinese products. This means more pressure to impose countervailing duties,” said Alicia García-Herrero, chief economist for Asia-Pacific at French investment bank Natixis.

She said Chinese President Xi Jinping appeared to ignore calls from EU leaders to tackle overcapacity during a trip to Europe this month.

“The EU cannot do much other than lift the tariffs. I think we are heading for a trade war.”

A senior EU official said Brussels was trying to coordinate with Western allies such as the US to prevent “other measures being taken” against Chinese overproduction and the “flooding” of products in the single market, “which is really problematic for us’.

But the EU is hampered by the requirement that all its trade measures be WTO compliant, another official said, adding that breaking those rules would create a much worse situation that would negatively affect all parties.

Xie downplayed the impact of the WTO-compliant trade protections the EU may roll out, saying they “will be no match for Chinese manufacturers’ proven ability to scale up, cut costs and come up with solutions.”

Commission investigators must painstakingly gather evidence that could survive a legal challenge, and rates can only be set at a level commensurate with the disruption.

Analysts expect such tariffs to reach 25 percent when a study on subsidies for Chinese electric vehicles is completed within weeks, well below the U.S. level of 100 percent.

Rhodium Group, a US consultancy, has calculated that such a level would still make EU sales more profitable for Chinese companies than domestic companies, and would therefore have little impact.

The bloc remains divided over whether to take stronger action against Chinese companies, also fearing possible retaliation against European companies.

Chancellor Olaf Scholz this week warned of tariffs on Chinese cars – given the exposure of many German carmakers to Beijing’s retaliatory measures. Scholz was accompanied by Swedish Prime Minister Ulf Kristersson, whose national carmaker Volvo is owned by China’s Geely.

Still, the EU has recently taken more aggressive steps against Chinese companies, with commission officials last month raiding Nuctech, a maker of scanning equipment, in an anti-subsidy investigation.

Brussels has also used newly acquired powers to force Chinese bidders to withdraw from solar farm and train contracts and to warn Beijing against restricting its access to the EU medical device market unless it opens up to EU manufacturers.

One official pointed out that the US imported far fewer Chinese electric vehicles than Europe.

A commission spokesman said Brussels shared “US concerns about overcapacity and unfair trade practices. . . and addresses them through its own instruments and in accordance with WTO rules.”

Policymakers in the EU are also concerned about the precedent set by US measures for a possible return to the White House by Donald Trump, who imposed 25 percent tariffs on steel and 10 percent on aluminum imports from the EU, and has indicated that he would expand this. such measures if he wins the November elections.

“Biden has just handed a blueprint to Trump and made everything clear to him,” an EU diplomat said in response to the measures. “Like [Trump] wins in November, we can expect similar treatment.”

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