Spain and Germany urge rethink on EU tariffs on Chinese-made electric vehicles

Spanish Prime Minister Pedro Sanchez has called on the European Union to rethink plans to impose punitive tariffs on Chinese-made electric vehicles in a major coup for Beijing. “I have to be blunt and frank with you that we need to reconsider – all of us, not only member states but also the [European] Commission,” Sanchez said during a visit to Kunshan in eastern China on Wednesday. “We don’t need another war, in this case a trade war,” Sanchez said when asked about how Spain plans to vote on a key vote of member states expected later this month. Later on Wednesday, German Chancellor Olaf Scholz expressed support for Sanchez’s position, saying via his spokesman Steffen Hebestreit that this “direction of travel is one that we share”, Bloomberg reported. During a meeting with Chinese President Xi Jinping on Monday, Sanchez had spoken favourably of “fair trade” with China. Spain had previously been one of the main supporters of the commission’s proposal to place tariffs on Chinese-made EVs. An investigation by Brussels concluded subsidies at every stage of the supply chain enabled Chinese competitors to sell their products in Europe at a cheaper price, undercutting local manufacturers. Sources said Madrid’s rationale – shared with the French government – was that higher import tariffs would force Chinese firms to build factories in their countries. In an indicative vote in July, Spain voted in favour of the duties. In the upcoming binding vote, 15 of the bloc’s 27 member governments accounting for 65 per cent of its population will have to vote against the duties or they will come into force for five years. Germany, meanwhile, abstained – although Scholz has been long critical of any effort to disrupt the automotive trade. Before the chancellor’s public comment on the vote, German diplomats had said that Berlin’s abstention would remain, given that its ministries are divided on the topic. Both the economic and foreign ministries have supported the duties. “I think we need to build bridges between the European Union and China, and from Spain what we will do is to be constructive and to try to find a solution, a compromise, between China and the European Commission,” Sanchez said. This week China’s vice-minister for commerce Li Fei has been meeting senior EU officials in Brussels, where talks about a possible solution are continuing. The commission has shown some flexibility, and lowered the proposed tariff rates on some companies after consultations with their executives. Tesla will have its proposed tariff rate lowered for a second time to 7.8 per cent from 9 per cent. Chinese firms SAIC and Geely will have their rates lowered from 36.3 per cent to 35.3 per cent and from 19.3 per cent to 18.8 per cent, respectively. These duties will be applied in addition to the base 10 per cent rate the EU applies to all EV imports. Sanchez’s comments came a day after Chinese company Envision agreed to build a US$1 billion plant in Spain making hydrogen electrolysers, a product used to produce low-emission hydrogen from renewable sources. Last week EU climate commissioner Wopke Hoekstra complained that China was “oversupplying” the product “at ever-lower costs”. Spain, as the biggest EU supplier of pork products to China, is also in line to suffer from potential anti-dumping duties after Beijing began an investigation into the sector. Analysts said the U-turn showed China’s efforts to pick off individual EU members were paying off. “Sanchez’s change of position is not only a problem for the commission but also for the EU and Spain,” said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis. “Already 55 per cent of Chinese exports of EVs go to the EU. [As more countries] impose tariffs on EVs, the EU might end up absorbing even more of China’s excess capacity,” she added. Madrid’s defection will be a blow to policymakers in Brussels, who have long thought they had the numbers to sail through the tariff vote. A German vote against the duties would compound this disappointment. As it stands, however, populous countries such as Italy, France and Poland need to change tack to block the tariffs – which is still seen as unlikely, but the situation is increasingly fluid. Noah Barkin, an analyst at research house Rhodium Group, described it as a “litmus test of the EU’s China policy”. “We can’t know what carrots Xi offered Sanchez or what sticks he threatened him with during their meeting. But reversing course on a policy issue that is so central to European credibility and leverage with Beijing so late in the game, and during a trip to China to boot, is a damning indictment of Sanchez’s foreign policy mettle and sophistication,” he said.

Spain and Germany urge rethink on EU tariffs on Chinese-made electric vehicles

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Pedro Sanchez says ‘we need to reconsider’ the move during a visit to China, with German Chancellor Olaf Scholz supporting his statement

Pedro Sanchez says ‘we need to reconsider’ the move during a visit to China, with German Chancellor Olaf Scholz supporting his statement