EU Files WTO Complaint Against China Over Auto Tariffs

Is the EU's imposition of tariffs on Chinese cars finally coming to an end?

This matter has been full of twists and turns, with ups and downs that even Hollywood blockbusters wouldn't dare to portray. What the EU wants is clear to everyone, and China's demands are also clear, so this is an open game of interests. So what will the final outcome be?

In the past two days, there has been a new development in the EU's imposition of tariffs on Chinese cars.

According to a report by Caixin, on September 23, the European Commission requested consultations with the World Trade Organization (WTO) regarding "China's initiation of an anti-subsidy investigation into dairy products imported from the EU."

We said a few days ago that this is China's most powerful move, mainly for three reasons.

First, subsidies do exist, not only are there special subsidies from the EU, but many EU countries also have their own subsidies. Second, this investigation involves more than ten EU countries, covering a wide range. Third, European farmers are very powerful, with a large number of people, and have always been a major source of votes in elections.

On August 21, China initiated an anti-subsidy investigation into EU dairy products. This time, it has been brought to the WTO, which obviously means that after more than a month of consultations, China and the EU have not reached an agreement.

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However, the EU has also taken us to the WTO, which does not mean that the high-level talks between the two sides have failed and they have to follow the rules, it is more likely a necessary gesture and procedure.

Why do we say this? We will reveal the answer later.The European Union has referred this matter to the WTO for consultation, which may serve two purposes. The first is that since this issue involves so many member states, the EU must demonstrate both a stance and action. The second is to buy time.

Why does the EU want to buy time?

The original voting date for the EU to impose additional tariffs on Chinese cars was set for September 25th. However, due to the visit of our Commerce Minister to Europe, both sides wished to engage in further discussions, leading to the postponement.

At this juncture, the EU's decision to buy time is a smart move because the upcoming vote will determine the long-term plan for additional tariffs on Chinese cars. This is essentially like kicking the ball back to the EU member states regarding the "dairy anti-subsidy investigation" issue.

If the final vote on automobile tariffs by EU member states turns out to be unfavorable to China, then if China also imposes countervailing duties on EU dairy products, they cannot blame the EU for not exerting enough effort.

When will the EU vote on automobile tariffs? What will the outcome be?

The deadline for this matter is in November, and a result must be reached before then. Some predictions suggest the voting will take place on September 30th, but we anticipate it will be in October.

Since the EU is currently adopting a strategy of delaying as much as possible, the longer the delay, the more passive the member states will become due to domestic opposition. This will lead to a more sober voting process, preventing any regrets later on and shifting the blame onto the EU.So, what would be the outcome of the vote? That's a bit complicated.

The European Union's imposition of additional tariffs on Chinese cars is not a complex matter in itself, but the process has been made overly complicated, and there is a reason for that.

Let's briefly sort out what the EU wants to do and what China's demands are.

In June, the EU announced the imposition of temporary additional tariffs on Chinese cars, with a rate that is not low, but much lower than the 100% imposed by the United States and Canada. This indicates that the EU wants to cater to the demands of its member states while also expressing a desire to have a serious conversation with China.

June is precisely the most critical time for the EU elections. The EU Parliament elections took place at the beginning of June, and in July, Ursula von der Leyen was successfully re-elected. The imposition of additional tariffs on Chinese cars was one of the cards played.

A few days ago, we published an article titled "EU's Shocking Secret! Imposing Additional Tariffs on Chinese Cars, von der Leyen Initiates a European Civil War," analyzing how this card was both a bargaining chip for von der Leyen's re-election and her power grab from Germany and France. What she wants is the actualization of the EU's power.

For EU member states, their demands vary, and can generally be divided into three categories.

Firstly, there are countries with automotive industries. Germany produces many electric vehicles in China for export to Europe, which is equivalent to imposing tariffs on them. The French automotive industry has declined rapidly and has almost no business in China. They fear that Chinese cars will impact their European operations, so they support the tariffs.

Countries with a foundation in the automotive industry hope to capture the production capacity of Chinese cars, such as Italy and Spain. Therefore, they also support the tariffs because only with higher tariffs can Chinese cars be exported more quickly, and they can gain the upper hand in negotiations.Countries without a complete automotive industry are more complex; some are eager to try and compete for China's automotive production capacity.

Thus, this matter has evolved into the EU promoting it for other purposes, with most member states supporting it.

Now, the numerous farmers in Europe are starting to oppose it, making it difficult to handle.

So, what are China's demands? Of course, the best would be free trade without tariffs; failing that, the next best would be to add a little less.

Therefore, if there is a vote in October, it is unlikely that there will be an immediate result; it may take two or three rounds of voting to reach a compromise.

In recent days, the EU has hinted again at considering a reduction in temporary tariffs; they have already reduced them once before, but the reduction was too small to serve as a test.

So, the final automotive tariff plan is likely to be a compromise between China and the EU.

This plan may have already been agreed upon at the high level by both sides; the EU's lawsuit against us at the WTO is merely a gesture.

How much will the tariffs be increased? In the past two months, Germany proposed a unified rate of 15%, which is likely to be close to the final figure.