The trade dispute between China and the European Union continues to escalate. Following the EU’s announcement of plans to impose final anti-subsidy tariffs on Chinese electric cars, China promptly declared that it is investigating whether European dairy producers are receiving unfair government subsidies. Experts point out that if the EU proceeds with the anti-subsidy investigation on Chinese electric cars, it would be a significant setback for China’s extensive electric car development plans, while China’s investigation into EU dairy products would harm domestic consumers.
On August 21st, China’s Ministry of Commerce announced an investigation into subsidies on dairy products from the EU and its member states, potentially leading to tariffs on these dairy products exported to China.
The investigation on dairy products will cover a range of items, including fresh and processed cheese, blue cheese, as well as milk and cream with fat content exceeding 10%. The probe will scrutinize subsidies under the EU’s Common Agricultural Policy and those provided by eight EU countries including Italy, Finland, and Croatia.
According to data from the European Commission, Europe is the second-largest destination for China’s dairy product exports, with China being the second-largest market for EU skimmed milk powder and whole milk powder. The UK and the US are the top two recipients of EU butter and cheese exports, with China ranking third and eighth, respectively. Last year, European exports of dairy products to China totaled around 1.8 billion euros, slightly lower than the previous year’s 2 billion euros, accounting for about 9.5% of the EU’s total dairy product exports.
American economist David Huang told Dajiyuan that China’s retaliatory measures against Europe will have a significantly negative impact on the lives of ordinary Chinese people. Domestic dairy products in China have long been criticized, plagued by various issues such as melamine contamination, protein and heavy metal content, among others.
“Relatively inexpensive European dairy products could improve the lives of ordinary citizens in China. By imposing anti-subsidy measures on dairy products, China is sacrificing the health of its citizens.”
On August 20th, the European Commission disclosed the final draft decision on the anti-subsidy investigation into Chinese electric cars, proposing that all 27 EU countries agree to impose varying anti-subsidy tariffs ranging from 17% to 36% for at least 5 years, as well as levying a 9% tariff on electric cars exported from China to the EU, specifically for Tesla.
When adding the existing 10% tariff on all imported electric cars, Chinese electric cars exported to the EU would face actual tariffs ranging from 19% to 46.3%.
Sun Guoxiang, Associate Professor of International Affairs and Business at Nanhua University in Taiwan, stated to Dajiyuan that the EU’s imposition of tariffs on Chinese electric cars would indeed have a significant impact on China, not only affecting the electric cars but also influencing China’s overall market strategy.
“Firstly, the EU is a crucial export market for Chinese electric cars. The imposition of anti-subsidy tariffs by the EU will directly affect the price competitiveness of Chinese firms in the European market, especially for leading Chinese electric car brands looking to expand internationally. Secondly, it will impact the manufacturing and supply chains, causing some European firms to reconsider their supply chain configurations, reducing reliance on Chinese components or technology.”
Moreover, he believes that if the EU’s anti-subsidy measures take effect, it will weaken China’s voice in the global electric car market, leading to additional political and economic pressure domestically and internationally for the Chinese government.
“The electric car industry is currently China’s most important strategic industry. The government’s subsidies and support policies will face reevaluation pressure, and China may be forced to adjust its foreign economic policies to seek other markets to make up for the losses.”
David Huang told Dajiyuan that traditionally, China’s top three advantageous export industries were electrical appliances, furniture, and clothing. However, over the past five years, Beijing has aimed to increase its export market share through new industries such as electric cars, batteries, and solar panels by significantly increasing subsidies and encouraging consumers to purchase electric cars at high prices. The EU’s move to counteract Chinese electric cars will thwart China’s plan to expand its global export capacity.
Huang said that by diminishing China’s price advantage, the EU is delivering a targeted blow to China, undermining the efforts of the past five to six years to cultivate its export industries.
On the evening of August 20th, China’s Ministry of Commerce issued a statement, attributed to an unnamed spokesperson, expressing dissatisfaction with the EU’s new actions, stating, “firmly opposed,” and “will take all necessary measures to defend the rights and interests of Chinese enterprises.”
Regarding China’s strong reaction, Huang pointed out that China’s electric car development heavily relies on substantial government subsidies, which are also driven by the government’s installation of surveillance monitors to achieve control and precision planning over many years. The EU’s countermeasures hold great significance for China’s plans, eliciting a vehement response.
“Free healthcare and education in China are difficult to implement, so why is the sudden substantial subsidy allocated? It is for social control. Therefore, developing electric cars is not only to break through export bottlenecks and reclaim the global market share of export goods, but more to monitor various aspects of people, including obtaining various information from the road surface to personal data and geographical aspects inside the car using mobile phones and computers – China’s emphasis lies there.”
Following the disclosure of the EU’s final decision on imposing anti-subsidy tariffs on Chinese electric cars, a verdict is scheduled to be made by November 4th.
Sun Guoxiang noted that the trade policies of EU member states towards China are increasingly converging in protecting their own interests, indicating a higher likelihood of the EU passing the anti-subsidy investigation on Chinese electric cars.
He also mentioned that some developing countries are considering the impact of Chinese-made goods causing unfair competition in their domestic markets, leading to issues in their industries. Problems are gradually emerging in Southeast Asian countries. Therefore, if the EU’s anti-subsidy measures against China are implemented, it may set an example, leading international trade back to a fair path.
Huang also believes that the EU’s new policy is highly likely to pass. Part of the reason is that while China is profiting commercially in Europe, it is also aiding Russia in threatening European security and unwilling to abandon this position. “Therefore, the EU’s move to impose taxes on Chinese electric cars is based on the standpoint of war, with a very firm stance.”
Huang also pointed out that the European industry is gradually realizing the substantial surveillance equipment embedded in Chinese electric cars poses a significant hazard to information security.
“After the (EU tariff plan) is passed, it will act as a counterbalance against Beijing’s massive plan for electric car development over the past 5 to 10 years; it will have a detrimental impact on Beijing’s ambition to dominate the world market through electric cars. For China’s goal of monitoring through electric cars, it is also a setback.”
Huang stated that China has squandered substantial subsidies originally intended for appliances, furniture, and clothing to subsidize electric cars. Overall, this is highly unfavorable for the sluggish and contracting Chinese economy, and the negative impact will gradually surface.