Vehicles from Chinese brands wait to be exported from a bustling port in Suzhou, Jiangsu province, a key hub for international trade. [Photo provided to China Daily]
The prospect of China and the European Union nearing an alternative solution regarding the EU’s imposition of extra tariffs on Chinese-made electric vehicles presents a vital opportunity to ease mounting trade tensions between these two global economic titans, analysts emphasize.
Analysts suggest that a compromise on the tariff issue between China and the EU would not only invigorate the electric vehicle (EV) sectors in both regions but also greatly enhance the overall economic relationship that underpins their partnership.
Bernd Lange, chair of the Committee on International Trade of the European Parliament, disclosed to German broadcaster n-tv on Friday that significant progress has been made, with Brussels and Beijing poised to finalize a deal in which China would offer its EVs in the EU at a set minimum price; however, specifics of this agreement remain under wraps.
Amid escalating tensions due to unfounded allegations surrounding unfair subsidies in China’s EV industry, the European Union concluded its investigation on October 29, leading to the imposition of additional tariffs that could reach 35.3 percent on Chinese electric vehicle imports over a five-year period, supplementing the standard 10 percent import duty.
Despite the new tariff imposition, dedicated technical teams from both China and the EU engaged in five rigorous rounds of discussions in Beijing from November 2 to 7, along with follow-up video conferences the subsequent week. Their primary aim: to negotiate a price undertaking agreement that could redefine bilateral trade dynamics.
Under the proposed arrangement, China would consent to a mutually beneficial export price and volume for its electric vehicles in return for the EU rescinding the recently increased tariffs, effectively transforming the trade landscape.
A source familiar with the ongoing negotiations informed China Daily earlier this month that after an intense round of talks, China and the EU successfully reached a “technical consensus,” particularly focusing on the framework of the anticipated price undertaking agreement and its implementation mechanisms.
Neither the European Commission, the executive branch of the EU, nor China’s Ministry of Commerce had provided comments on Lange’s statements by the time of publication on Monday.
If formalized, the deal could meet the EU’s objectives to protect its domestic automotive industry while simultaneously averting the potentially punitive tariffs on imports of Chinese electric vehicles, noted Sang Baichuan, dean of the University of International Business and Economics’ Institute of International Economy.
While the price undertaking agreement could offer immediate relief to European car manufacturers, Sang cautioned that developing a robust local value chain to ensure the long-term sustainable growth of the EU’s electric vehicle sector represents a more significant and complex challenge ahead.
Simply cutting off supply from China isn’t a sustainable solution, Sang argued, advocating instead that European firms should adopt a more strategic, calm, and rational approach towards competition and potential collaborations with their Chinese counterparts.
According to a report released in April by the International Energy Agency, China currently commands a staggering 85 percent of the global battery cell production capacity, cementing its dominance in the critical battery supply chain.
Sang articulated that “the price undertaking will ultimately revert to market-based pricing in the long run,” which is anticipated to prompt Chinese automakers to reassess their market positioning, cost structures, and various integral components of their value chains to remain competitive.
Cui Hongjian, director of the Center for European Union and Regional Development Studies at Beijing Foreign Studies University, remarked that the EU official’s recent statement signals a concerted effort within the bloc to reach a consensus with China as expeditiously as possible.
In light of the ongoing economic challenges facing Europe and persistent opposition from various member states, Cui underscored the strategic importance for the EU to avoid exacerbating trade tensions that could lead to more significant economic repercussions.
In an escalatory response, the Chinese government is enforcing temporary anti-dumping tariffs on select EU brandy imports, a measure announced by the Ministry of Commerce in early October. This development coincides with ongoing investigations into EU imports of pork, pork byproducts, and dairy items.
Additionally, Chinese officials are deliberating heightened tariffs on imported fuel-powered vehicles that feature large-displacement engines from the EU, according to information released by the ministry.
What are the main factors driving the European Union’s decision to impose tariffs on Chinese electric vehicles?
**Interview with Dr. Alice Chen, International Trade Analyst**
**Editor**: Thank you for joining us today, Dr. Chen. The European Union has recently imposed additional tariffs on Chinese electric vehicles. Could you give us an overview of the current situation and how the negotiations are developing?
**Dr. Chen**: Certainly! The European Union’s tariffs, which could rise to an additional 35.3% on Chinese electric vehicle imports, are a response to concerns over alleged unfair subsidies in China’s EV industry. However, recent discussions between the EU and China have shown promising signs of a compromise. Both sides are working towards a price undertaking agreement where China would export its EVs to the EU at a set minimum price, potentially alleviating some of the tensions that have arisen from trade disputes.
**Editor**: That sounds like a significant step. What are the implications of such an agreement for both regions?
**Dr. Chen**: A successful agreement could invigorate the electric vehicle sectors in both the EU and China, fostering a healthier economic relationship. The EU aims to protect its domestic industry, while China stands to gain greater access to the European market. It could also serve as a blueprint for resolving future trade tensions. Economic interdependence could benefit both sides, especially in a rapidly evolving sector like electric vehicles.
**Editor**: Bernd Lange mentioned reaching a “technical consensus” in the negotiations. What does this mean for the potential deal?
**Dr. Chen**: A technical consensus indicates that both parties have found a workable framework for the agreement, focusing on key details like pricing and export volumes. This is a crucial step in formalizing a deal and shows that both sides are willing to collaborate to find a solution. However, the actual implementation will still require careful management and monitoring to ensure compliance.
**Editor**: Looking ahead, what challenges do you foresee in establishing a robust electric vehicle sector in the EU?
**Dr. Chen**: While immediate relief from tariffs could help EU manufacturers, the long-term challenge lies in building a sustainable local value chain. European firms need to invest in their own production capabilities and innovation to compete effectively, rather than relying solely on imports from China. This requires significant investment in infrastructure, technology, and perhaps even nurturing local startups to create a self-sustaining ecosystem.
**Editor**: Thank you, Dr. Chen, for sharing your insights on this complex issue. It will be interesting to see how negotiations unfold and what impacts they will have on the global electric vehicle market.
**Dr. Chen**: Thank you for having me. It’s an important topic, and I look forward to seeing how it develops.
