Ursula von der Leyen, president of the European Commission, just won a significant battle. Chinese electric vehicles will be subject to five-year levies from the European Union starting next week. Although von der Leyen disagrees with Trump, who supports imposing tariffs on both allies and adversaries, she is committed to changing the EU’s strategy toward China to reflect the current situation. And to deliver, she has mobilized the bureaucracy in Brussels. In terms of von der Leyen’s policy goals, the tariff decision was crucial. Electric vehicles are only the beginning now that it’s over. Numerous more investigations are still ongoing, ranging from the wrongdoing of Chinese fast-fashion firms to governmental procurement of medical gadgets and subsidies for wind turbines. A more confident European approach is becoming feasible thanks to an innovative set of new instruments.
The EU’s shift in its approach to China: key drivers:
For once, the narrative does not focus on how polarized member states’ ties with China are and will remain. The truth is that it made no difference at this pivotal moment. The commission president had a well-defined set of objectives, but no coalition of member states was powerful enough to resist the proposed actions. Beijing is not pleased that the commission has subtly begun a significant rebalancing of EU-China relations. Brussels has learned three important lessons about dealing with China, as seen by this decision. The group now has to figure out how to handle the attack. The first lesson was to apply existing concepts in better ways rather than changing the rules. The objective assigned to commission officials was to look into and correct the distortions that Chinese battery electric vehicles were causing in the European market. They believed that unfair, unlawful, and opaque subsidies were to blame for the low pricing of cars made in China, harming European automakers in the process. Chinese market share in Europe’s electric vehicle industry is increasing, while European automakers’ market share in China is declining. Things are rapidly shifting against the interests of European producers.
Balancing trade and security in EU-China relations:
The countervailing duties differ from U.S. measures in that they are specific, subtle, and spaced out. They will still hurt, though. Although they could theoretically afford the increased taxes, Chinese automakers are strongly motivated to sell to countries with better profit margins. They have a better chance of surviving the intense low-margin competition in the Chinese market if they make money elsewhere. Additionally, the tariffs convey a significant political message: the EU is prepared to exercise negotiation power and will impose a cost on doing business. Second, any inquiry into the automotive industry was likely to cause a great deal of friction both with and among member states, but Brussels discovered that there is a benefit to not backing down. Automobile manufacturers have long been regarded as a crucial industry in Europe and employ a significant number of people. Overall, there is a reliance on big, mostly German, industrial giants, many of whom have shifted manufacturing and R&D in the electric car sector to China since they rely on the Chinese market for their earnings. The tariffs are opposed by these giants. This explains why there was not a large number of member states supporting the commission and why the discussion was so intense. The capitals of Europe struggled to decide what they should and what they wanted. The inquiry particularly infuriated the German government, which viewed it as detrimental to German automakers and their strong connections to the Chinese market.
The impact of global tensions on EU-China strategy:
By taking on vehicles, the commission demonstrated that, even in the absence of Germany’s support, Brussels is not only ready but also able to take action on difficult issues. While Brussels will continue to closely monitor industries like solar or rail rolling stock, where the mere threat of subsidy investigations has already caused Chinese companies to withdraw from bids and projects, this has given impetus to the plethora of measures that will be implemented in the coming months, whether they are related to wind turbines, fast fashion, or electrolyzers. Third, the EU was aware that Beijing would try to strongly oppose the tariffs after realizing how important they would be to their political message. One of the best examples of Beijing’s attempts to exert political influence was the electric car tariff dispute. The Chinese leadership made ambiguous pledges of investments in the struggling car industry in a few member states together with specific threats to important exports from specific EU nations, ostensibly in an effort to increase “no” votes. Beijing has dispatched several high-ranking delegations to important member states and Brussels.
