Humongous tariffs on Chinese electric vehicles: is Brussels shooting itself in the foot?

When your own major car companies slam your antidumping duties on electric vehicles, then you know you just made a terrible mistake, right?

It was last week that the European Commission launched additional record tariffs against Chinese electric vehicles ranging from 17.4% to 38.1%, and if one adds to those the existing ones of 10%, then the tariffs come close to 50%. The tariffs will start applying from July 5th and Brussels justifies this move by arguing that this is the right thing to do to protect itself from Chinese subsidies affecting the European market.

Of course the Chinese side slammed the tariffs as pure protectionism but one can be particularly certain that something is wrong with this bizarre move of Brussels when the entire European car manufacturing industry goes furiously against it.

Colossal European car makers like BMW, Volkswagen and Mercedes-Benz stress that this is detrimental for the European car industry as it will cause a domino effect whereby everyone will lose, and most of all the European consumers.

BMW stated on the issue: “This decision for additional import duties is the wrong way to go. The EU Commission is thus harming European companies and European interests.Protectionism risks starting a spiral: Tariffs lead to new tariffs, to isolation rather than cooperation. From the BMW Group’s point of view, protectionist measures, such as the introduction of import duties, do not contribute to successfully compete on international markets. Free trade remains the BMW Group’s guiding principle. Our company is committed to this.”

Volkswagen had to say: “Countervailing duties are generally not suitable for strengthening the competitiveness of the European automotive industry in the long term – we reject them …”The timing of the EU Commission’s decision is detrimental to the current weak demand for BEV vehicles in Germany and Europe … The negative effects of this decision outweigh any potential benefits for the European and especially the German automotive industry.”

Mercedes-Benz didn’t hold back and argued: “As an exporting nation, what we do not need are increasing barriers to trade. We should work on dismantling trade barriers in the spirit of the World Trade Organisation.”

Stellantis, the car group of well known European car brands like Jeep, Fiat, Opel and Peugeot underscored: “As a global company Stellantis believes in free and fair competition in a worldwide trade environment and does not support measures that contribute to the world fragmentation…Stellantis is agile to adapt and take advantage of any scenario and today’s tariff announcement will not deter our overall strategy with respect to Leapmotor in Europe, as we have taken this potential development into account.”

If the voices of Europe’s largest car manufacturers are not voiced in Brussels, then words have just lost their meaning. Top car industries in the world condemn Brussels’ protectionist move warning that this was utterly wrong and will sink the car industry. Does the Brussels bubble know about cars better than them?

It can be highly justified that bureaucrats who sit on their tax free desks in Berlaymont cannot tell the difference between an exhaust pipe and a bumper. What they are great at though these days is parroting, and coincidentally enough the old Biden’s administration had recently announced quadruply increased tariffs against Chinese electric vehicles of up to 100%. Indeed, Brussels played it “safe” with 50%, but still just reading the statements by Mercedes-Benz, BMW, Volkwagen and Stellantis, that’s enough to destroy it all.

Forget green goals

And of course, what about the notorious green transition evangelism of Brussels? It is true that the EU is a world champion in setting ambitious targets for the climate and green energy and kudos for doing so. However, a move like the above is like shooting itself in the foot, simply because the prices of electric cars will go higher and higher as the businesses will push all this burden to the poor EU consumer as always. And of course, fewer and fewer people will be stupid enough to follow this trade charade and will stick to petrol and diesel instead. The latter will utterly cancel the 2035 target for only electric vehicles in the European streets, the 2050 greater climate targets and so on.

Some people used to say that it is too soon for a consumer to buy and electric car as there is no sound past experience with them and little is known in terms of reliability. Well, now all people will say don’t buy electric cars because they are just too bloody expensive. What a self-destructive policy Brussels took off this time, coinciding by chance with the big US feast of the 4th of July.

Porks for cars?

And of course, in addition to Europe China too has protested the new tariffs claiming them as illegal measure while a lawsuit at WTO might be on its way from Beijing to Geneva as this article is being read. And indeed China has a wide array of arrows in the trade quiver that will show Europe where it hurts, like European cars on the one hand, given the large investment of European car makers in China and on the other hand other EU products like luxury goods, cosmetics, wine, chocolate and porks.

Speaking about porks, China now launched a strategic antidumping investigation against European pork. To be noted that China is said to be the largest export market for EU pork in the world. This stresses the damage for the European pork economy as well as the farming sector overall. Major pork exporters like Spain, Germany, Belgium, Netherlands and Denmark will face tremendous shock in their economies, depending on the size of the Chinese tariffs.

Ugly trade wars

How can an antidumping action in cars relate to farming? This is all about the beauty of trade wars, or the ugliness of them. The fact that Brussels hit Chinese electric cars doesn’t mean that China will necessarily retaliate with the same. Actually, China wants to show Europe where it hurts most, and this is definitely farming.

In a European Union that is shocked by the major increase of far right in the recent European Elections, an additional hit on the livelihoods of tens of millions of vulnerable farmers in Europe will just give more power to the many many Le Pens across the EU, destabilising further the political status quo in the Old Continent.

High prices in pork will make numerous EU investors in the sector go bust, will fire staff, will buy less animal feed, will create less demand for farmers’ crops to make animal feed and so on and so forth. It is a domino effect, the result of which can be catastrophic to the farming economy of the EU. And this is enough to start chaos.

It is of note here that Europe doesn’t necessarily handle economic crises all that well. We all remember what happened in the German Parliament in the previous century and its aftermath. We just can’t go back to the mango tree, right?

Too subtle?

The thing is that Brussels’ move is not definitely calculated or risk optimised and it just gives a couple of weeks for the US to celebrate even more on the 4th of July, rather than China and Europe to provide ample feedback to the huge tariffs. But not everything is about the great transatlantic partnership, is it? Sure it has its significant benefits and many jobs in Brussels and elsewhere depend on it but let’s face it, the EU needs to put its own house in order first. The electric car industry goes hand in hand with the future of the European economy and the future of the much advertised circular economy.

Unless all of those nice green things become obsolete when someone in Brussels wants to renew the tenure, for example for another 5 years. Can this all be done for a job application? Definitely not one, the jobs are many and well paid and untaxed. Too subtle?