• The minister arrived in Beijing on a last-ditch mission to avoid a damaging trade war with China after the EU threatened to slap additional tariffs on electric cars.

Germany’s Economy Minister Robert Habeck said on Saturday he had been informed by EU commissioner Valdis Dombrovskis that there would be concrete talks on tariffs with China.

The confirmation came after China’s commerce ministry said its head Wang Wentao and Dombrovskis, executive vice president of the European Commission, had agreed to start consultations over the EU’s anti-subsidy investigation into Chinese electric vehicles (EVs).

Habeck said in Shanghai that the goal was a level playing field between countries. It is good to be export-oriented, but not to use subsidies for that, he said.

If a compromise is not reached between Brussels and Beijing, the European Commission will impose extra tariffs of up to 38 percent on Chinese electric vehicles it says have benefitted from unfair subsidies.

The new higher tariff rate would first be imposed provisionally, before becoming definitive in November.

“What is important now is that we talk,” Habeck said following the bombshell EU announcement. Using tariffs to exert political pressure was “the last resort and often the worst option”, he said earlier.

Officials in Habeck’s ministry have noted that he is “not speaking and not negotiating in the name of the European Commission” — however, Brussels will need the support of Europe’s largest economy for its next steps.

Hard ask

Germany’s large and influential auto manufacturers are fearful of a trade war with Beijing that could rebound on their business activities in China.

For Mercedes-Benz, Volkswagen and BMW the Chinese market represents up to 36 percent of their sales.

China topped the list of Germany’s trading partners in 2023 for the eighth year in a row, ahead of the United States.

“I think Habeck probably is hoping to find some sort of deal or solution and at the very least to get China to not retaliate,” Jacob Gunter, senior analyst at China-focused think-tank MERICS.

For China, the goal “will be to try to get Germany to play a bigger role in getting rid of, or at least mitigating, the EV tariffs that Brussels set up last week”, Gunter said.

It would be a hard ask for Habeck to get Beijing to reduce its subsidies for electric vehicles, Gunter said.

But convincing China not to pursue a “significant retaliation” would be a good outcome.

Source: German economy minister confirms EU talks with China on tariffs (trtworld.com)

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NSN.Asia

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