the EU is preparing to raise taxes on Chinese cars, but above all needs investment

The 27 member states of the European Union are preparing to vote on Friday to confirm the increase in customs duties applied to Chinese electric cars. A solution advocated by the European Commission supported by France.

Electric vehicles produced in China and sold in Europe are accused of unfair competition by Brussels. Despite threats from Beijing, the EU is preparing to confirm, Friday October 4, 2024, the increase in customs duties applied to these vehicles, from 10% to 38% for five years. Like France,Other countries such as Italy, Poland and Greece are also expected to vote in favor.

The vote, which will take place on Friday October 4, should therefore “pass”rejoice the diplomats of several countries who support the European Commission’s proposal. The measure will be supported by countries which consider that the European automobile industry – which represents more than 14 million employees – must be better protected. On the other hand, other countries, such as Germany or Spain, are worried about Chinese reprisals and fear future export difficulties for their own products.

But failing to rally a majority against these new customs duties, Germany should ultimately abstain, hoping to be able to push for a solution negotiated between Brussels and Beijing. For example, the establishment of a floor price in Europe would cancel out a large part of the subsidies received in China by manufacturers, which allow them very low sales prices.

The probable adoption of new customs duties on Friday will therefore not signal the start of a new trade war, but rather the opening of a new round of negotiations, which should continue in the coming months.

The main issues of this vote and future discussions are primarily commercial, of course. China represents the third largest export market for the European Union, after the United States and Great Britain. Europeans cannot therefore deprive themselves of this outlet. For the very powerful German automobile industry, it is even the largest market in the world. German manufacturers make around a third of their sales in China and, for decades, exports to China have been a considerable driver for Europe’s largest economy.

But there are also industrial, and therefore social, issues. We saw this in September, in Brussels, with a large demonstration organized by automobile workers and the strike in a large electric car factory, Audi, which employs 3,000 people and employs 1,200 subcontractors. European electric cars are expensive and have difficulty selling. So the arrival of Chinese cars, or even other brands manufactured in China, such as Elon Musk’s Tesla at a lower cost, ends up having repercussions on industrial activity and therefore on employment in Europe.

If we can say that China has already won the battle, no one wants to appear defeatist in Brussels. Alongside the vote, discussions with Beijing continue. The Chinese Minister of Commerce came to meet his counterpart, the European Commissioner for Trade, in mid-September. Other meetings should take place in the coming weeks, and the change of commissioner expected at the end of the year should not change anything.

In addition to the establishment of a floor price as an alternative to increasing customs duties, important decisions await the future European executive on the investment wall which aims to make European industry more competitive. This is the meaning of the report presented by the former boss of the European Central Bank, Mario Draghi, in September 2024. But it is difficult to see how these needs could be financed other than by a common loan at the European level, which is far away. to build consensus among member states.