By Mei Mei Chu, Joe Cash and Ellen Zhang
BEIJING (Reuters) – Beijing, as a vote on EU duties on Chinese-made electric cars looms, has used a carrot-and-stick approach to deal with the 27-nation bloc, which has threatened trade retaliation while including key countries in -EU to meet. -the other is about deals and investments.
The potential impact of anti-EU tariffs will fall heavily on states such as Spain, France and Italy that have expressed support for EV projects, with exports of pork, milk and alcohol to the world's second largest economy at risk.
European Union members such as Germany, Finland and Sweden that have not imposed tariffs will feel less affected, with less exposure to exports imposed by China.
China's tactics seem to be working.
The Prime Minister of Spain, Pedro Sanchez, ended his visit to China this week by sitting in a Chinese EV that he said was “an honor”. He then suddenly urged the EU to review its position.
According to a Spanish government source, Sanchez's team came away with the feeling that “Spain is very important now”, and that a tariff agreement on its pork products was imminent.
As a sweetener, a Chinese company agreed to build a $1 billion plant in Spain to make equipment used for hydrogen production, apparently supporting Spain's green ambitions.
With pork and milk, China is raising “domestic political costs” in countries that vote to impose EV tariffs, said Beijing-based economist Mei Xinyu, and the agricultural sector often plays a role in EU politics.
“These products are ranked in China as one of the leading export markets,” he said.
Pork, dairy and brandy exports from the EU to China are worth an estimated $10 billion by 2023, although not all products in those categories would be subject to tariffs. The bloc's exports to China last year were more than $280 billion.
CRUNCH TIME
I still feel a little bit of the US tariffs that were imposed during the Trump era, China does not want a trade war with the EU. But Beijing has made it clear it will fight back if Brussels imposes additional EV taxes of up to 35.3%.
Chinese-made EVs exported to Europe increased by 38% in 2023 to 656,000 units, including exports to non-EU countries. Europe accounted for more than 40% of EVs exported to China last year, according to Reuters figures based on data from the China Passenger Car Association.
Chinese Trade Minister Wang Wentao will visit Europe next week and hold talks with EU trade chief Valdis Dombrovskis.
Wang will also visit Italy, supporting EV pricing while also seeking Chinese investment to build EV production capacity.
China needs at least 15 EU members representing 65% of the EU population to oppose the tariffs in a vote in October.
But the positions within the EU remain different. Some small states are upside down. Others prioritize a close relationship with home.
“Ireland's exports to China are only a small fraction (of its exports), so Ireland will prioritize the EU market and relationship over China,” Ireland's trade representative to China said, speaking on condition of anonymity.
“China is still important, but business with China is difficult and not growing as expected.”
Ireland is the EU's fifth most exposed producer in China's milk probe and sixth worst in its pork probe.
'SHOCK AND SHOCK'
On the contrary, China appears to be leaving no room for negotiation or compromise with Canada, hitting it on Monday with an investigation into its ramped-up sales after Ottawa introduced a 100% tariff on Chinese EVs in August, accusing Beijing of unfair competition.
Unlike Brussels, Beijing did not give Ottawa advance warning of how it would back down, signals that are often relayed to Chinese state media such as the Global Times.
He Yongqian, a spokesman for China's Ministry of Commerce, said “evidence” shows that Canadian seed sales to China have been dumped and harmed the domestic industry, when asked to explain the difference in approach.
Canada's producers have been victimized by a system based on international trade rules, a spokesperson for Global Affairs Canada told Reuters.
“We are following this closely,” said the spokesperson.
Instead, Beijing is clearly open to negotiating with the EU, said Even Pay, a Beijing-based agriculture analyst at Trivium China.
“With Canada, they went straight out of shock and surprise,” Pay said.
