EU is Under Pressure After US Imposes Tariffs on Chinese Goods - Latest Global News

EU is Under Pressure After US Imposes Tariffs on Chinese Goods

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New U.S. tariffs on Chinese goods will redirect supplies to Europe and increase pressure on Brussels, which is fighting to avoid getting caught up in the trade war between Washington and Beijing.

President Joe Biden imposed 100 percent tariffs on Chinese electric vehicles on Tuesday and tripled the rate on steel and aluminum. He increased tariffs on solar cells to 50 percent and announced that tariffs on semiconductors would double from 2025.

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

The U.S. move comes as the European Commission struggles to protect domestic green tech industries from cheap Chinese competitors, with EU officials stressing that Brussels lacks the powers to intervene in a global trade war with Washington and Beijing to compete.

They predicted that the US measures would likely widen Europe’s already uncomfortably large trade deficit with China – 290 billion euros in 2023 – and that Brussels was actively trying to use its available “powers” to redress this imbalance.

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

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

“The EU can’t do much except raise tariffs. I think we’re headed for a trade war.”

A senior EU official said Brussels was trying to coordinate with Western allies such as the United States to avoid “other measures” against Chinese overproduction and “flooding” the domestic market with products, “which is really problematic for us.”

But the EU is hamstrung by its insistence that all its trade measures be WTO-compliant, another official said, adding that violating those rules would create a far worse situation that would negatively impact all sides.

Xie downplayed the impact of WTO-compliant trade defense measures the EU can introduce, saying they “will not be a match for Chinese manufacturers’ proven ability to expand, reduce costs and develop workarounds.”

Commission investigators must carefully collect evidence that could withstand a legal challenge, and tariffs can only be set at a level commensurate with the distortion.

Analysts expect those tariffs to reach 25 percent if an investigation into Chinese electric vehicle subsidies is completed within weeks, well below the U.S. level of 100 percent.

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

The bloc remains divided over taking more forceful action against Chinese companies, including over fears of possible retaliation against European companies.

Chancellor Olaf Scholz warned this week of tariffs on Chinese cars – given that many German automakers have faced retaliation from Beijing. Scholz was joined by Sweden’s Prime Minister Ulf Kristersson, whose national carmaker Volvo is owned by China’s Geely.

Nevertheless, the EU has recently taken more aggressive action against Chinese companies. Last month, Commission officials raided Nuctech, a manufacturer of scanning devices, as part of an anti-subsidy investigation.

Brussels also used the newly acquired powers to force Chinese bidders to withdraw from solar farm and train contracts and to warn Beijing that it would restrict its access to the EU medical devices market unless it opens to EU manufacturers.

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

A Commission spokesman said Brussels shared the US’s “concerns about overcapacity and unfair trade practices.” . . and addresses these with its own instruments and in accordance with WTO rules.”

EU politicians are also concerned about the precedent the US measures set 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 signaled he would expand such Actions if he wins the election in November.

“Biden just handed Trump a blueprint and gave him the all-clear,” an EU diplomat responded to the measures. “If [Trump] If we win in November we can expect similar treatment.”

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